What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-08-03 compared with 2022-08-05 · 559 added, 493 removed, 768 unchanged (58% of the section changed)

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Specific forward-looking statements in this report include, but are not limited to, statements regarding:

(i) our focus in the fiscal year beginning July 1, 2022 and ending June 30, 2023 (Fiscal 2023) and July 1, 2023 and ending June 30, 2024 (Fiscal 2024) on growth in earnings and cash flows;

(i) our focus in the fiscal years beginning July 1, 2023 and ending June 30, 2024 (Fiscal 2024) and July 1, 2024 and ending June 30, 2025 (Fiscal 2025) on growth in earnings and cash flows;

(ii) creating value through investments in broader Information Management capabilities;

(iii) our future business plans and business planning process;

(iii) our future business plans and operations, and business planning process;

(iv) business trends;

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(vi) the Company’s presence in the cloud and in growth markets;

(vii) our expectation to grow MSPs;

(viii) product and solution developments, enhancements and releases, the timing thereof and the customers targeted;

(ix) the Company’s financial condition, results of operations and earnings;

(x) the basis for any future growth and for our financial performance;

(xi) declaration of quarterly dividends;

(xii) future tax rates;

(xiii) the changing regulatory environment;

(xiv) annual recurring revenues;

(xv) research and development and related expenditures;

(xvi) our building, development and consolidation of our network infrastructure;

(xvii) competition and changes in the competitive landscape;

(xviii) our management and protection of intellectual property and other proprietary rights;

(xix) existing and foreign sales and exchange rate fluctuations;

(xx) cyclical or seasonal aspects of our business;

(xxi) capital expenditures;

(xxii) potential legal and/or regulatory proceedings;

(xxiii) acquisitions and their expected impact, including our ability to successfully integrate the assets we acquire or utilize such assets to their full capacity, including those acquired in connection with the acquisition of Zix Corporation (see Note 19 “Acquisitions” to our Consolidated Financial Statements for more details);

(xxiv) tax audits;

(xxv) the expected impact of our decision to cease all direct business in Russia and Belarus and with known Russian-owned companies;(xxvi) expected costs of the restructuring plans;

(xxvii) targets regarding greenhouse gas emissions, waste diversion, energy consumption and ED&I initiatives;

(vii) product and solution developments, enhancements and releases, the timing thereof and the customers targeted;

(viii) the Company’s financial condition, results of operations and earnings;

(ix) the basis for any future growth and for our financial performance;

(x) declaration of quarterly dividends;

(xi) future tax rates;

(xii) the changing regulatory environment;

(xiii) annual recurring revenues;

(xiv) research and development and related expenditures;

(xv) our building, development and consolidation of our network infrastructure;

(xvi) competition and changes in the competitive landscape;

(xvii) our management and protection of intellectual property and other proprietary rights;

(xviii) existing and foreign sales and exchange rate fluctuations;

(xix) cyclical or seasonal aspects of our business;

(xx) capital expenditures;

(xxi) potential legal and/or regulatory proceedings;

(xxii) acquisitions and their expected impact, including our ability to realize the benefits expected from the acquisitions and to successfully integrate the assets we acquire or utilize such assets to their full capacity, including in connection with the acquisition of Zix Corporation (Zix) and Micro Focus International Limited, formerly Micro Focus International plc, and its subsidiaries (Micro Focus) (see Note 19 “Acquisitions” to our Consolidated Financial Statements for more details);

(xxiii) tax audits;

(xxiv) the expected impact of our decision to cease all direct business in Russia and Belarus and with known Russian-owned companies;(xxv) expected costs of the restructuring plans;

(xxvi) targets regarding greenhouse gas emissions, waste diversion, energy consumption and Equity, Diversity and Inclusion (ED&I) initiatives;

(xvii) integration of Micro Focus, resulting synergies and timing thereof;

and (xxviii) other matters.

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(ii) our continued operation of a secure and reliable business network;

(iii) the stability of general political, economic and market conditions, including any potential recession;

(iii) the stability of general political, economic and market conditions;

(iv) our ability to manage inflation, including increased labour costs associated with attracting and retaining employees, and rising interest rates;

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The risks and uncertainties that may affect forward-looking statements include, but are not limited to:

(i) actual and potential risks and uncertainties relating to the ultimate geographic spread of COVID-19, the severity of the disease and the duration of the COVID-19 pandemic and issues relating to the resurgence of COVID-19 and/or new strains of COVID-19, including potential material adverse effects on our business, operations and financial performance;

(ii) actions that have been and may be taken by governmental authorities to contain the COVID-19 pandemic or to treat its impact on our business (or failure to implement additional stimulus programs) and the availability, effectiveness and use of treatments and vaccines (including the effectiveness of boosters);

(iii) the actual and potential negative impacts of COVID-19 on the global economy and financial markets;

(iv) integration of acquisitions and related restructuring efforts, including the quantum of restructuring charges and the timing thereof;

(v) the possibility that we may be unable to successfully integrate the assets we acquire or fail to utilize such assets to their full capacity and not realize the benefits we expect from our acquired portfolios and businesses, including the acquisition of Zix Corporation, (vi) the potential for the incurrence of or assumption of debt in connection with acquisitions and the impact on the ratings or outlooks of rating agencies on our

outstanding debt securities;

(vii) the possibility that the Company may be unable to meet its future reporting requirements under the Exchange Act, and the rules promulgated thereunder, or applicable Canadian securities regulation;

(viii) the risks associated with bringing new products and services to market;

(ix) fluctuations in currency exchange rates (including as a result of the impact of any policy changes resulting from trade and tariff disputes);

(x) delays in the purchasing decisions of the Company’s customers;

(xi) competition the Company faces in its industry and/or marketplace;

(xii) the final determination of litigation, tax audits (including tax examinations in Canada, the United States or elsewhere) and other legal proceedings;

(xiii) potential exposure to greater than anticipated tax liabilities or expenses, including with respect to changes in Canadian, United States or international tax regimes;

(xiv) the possibility of technical, logistical or planning issues in connection with the deployment of the Company’s products or services;

(xv) the continuous commitment of the Company’s customers;

(xvi) demand for the Company’s products and services;

(xvii) increase in exposure to international business risks (including the impact of geopolitical instability, political unrest, war and other global conflicts) as we continue to increase our international operations;

(xviii) adverse macroeconomic conditions, including inflation, disruptions in global supply chains and increased labour costs;

(xix) inability to raise capital at all or on not unfavorable terms in the future;

(xx) downward pressure on our share price and dilutive effect of future sales or issuances of equity securities (including in connection with future acquisitions);

and (xxi) potential changes in ratings or outlooks of rating agencies on our outstanding debt securities.

(i) our inability to realize successfully any anticipated synergy benefits from the acquisition of Micro Focus (Micro Focus Acquisition);

(ii) the actual and potential impacts of the use of cash and incurrence of indebtedness, including the granting of security interests related to such debt;

(iii) the change in scope and size of our operations as a result of the Micro Focus Acquisition;

(iv) the uncertainty around expectations related to Micro Focus’ business prospects;

(v) integration of acquisitions and related restructuring efforts, including the quantum of restructuring charges and the timing thereof;

(vi) the possibility that we may be unable to successfully integrate the assets we acquire or fail to utilize such assets to their full capacity and not realize the benefits we expect from our acquired portfolios and businesses, including the acquisition of Zix and Micro Focus, (vii) the potential for the incurrence of or assumption of debt in connection with acquisitions, its

impact on future operations and on the ratings or outlooks of rating agencies on our outstanding debt securities, and the possibility of not being able to generate sufficient cash to service all indebtedness;

(viii) the possibility that the Company may be unable to meet its future reporting requirements under the Exchange Act, and the rules promulgated thereunder, or applicable Canadian securities regulation;

(ix) the risks associated with bringing new products and services to market;

(x) fluctuations in currency exchange rates (including as a result of the impact of any policy changes resulting from trade and tariff disputes) and the impact of mark-to-market valuation relating to associated derivatives;

(xi) delays in the purchasing decisions of the Company’s customers;

(xii) competition the Company faces in its industry and/or marketplace;

(xiii) the final determination of litigation, tax audits (including tax examinations in Canada, the United States or elsewhere) and other legal proceedings;

(xiv) potential exposure to greater than anticipated tax liabilities or expenses, including with respect to changes in Canadian, United States or international tax regimes;

(xv) the possibility of technical, logistical or planning issues in connection with the deployment of the Company’s products or services;

(xvi) the continuous commitment of the Company’s customers;

(xvii) demand for the Company’s products and services;

(xviii) increase in exposure to international business risks including the impact of geopolitical instability, political unrest, war and other global conflicts, as we continue to increase our international operations;

(xix) adverse macroeconomic conditions, including inflation, disruptions in global supply chains and increased labour costs;

(xx) inability to raise capital at all or on not unfavorable terms in the future;

(xxi) downward pressure on our share price and dilutive effect of future sales or issuances of equity securities (including in connection with future acquisitions);

and (xxii) potential changes in ratings or outlooks of rating agencies on our outstanding debt securities.

Other factors that may affect forward-looking statements include, but are not limited to:

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(v) infringement of third-party proprietary rights triggering indemnification obligations and resulting in significant expenses or restrictions on our ability to provide our products or services;

(vi) failure to comply with privacy laws and regulations that are extensive, open to various interpretations and complex to implement including GDPR, California Consumer Privacy Act, California Privacy Rights Act, Virginia Consumer Data Protection Act, Colorado Privacy Act, Connecticut Data Privacy Act, Utah Consumer Privacy Act, and Country by Country Reporting (including with respect to transferring personal data outside of the EEA and the United Kingdom, as a result of the ruling of the Court of Justice of the European Union (CJEU) that the EU-US Privacy Shield is an invalid data transfer mechanism and that Standard Contractual Clauses (SCCs) are a valid transfer mechanism unless the country to which personal data is exported restricts the ability to comply with such Clauses (Schrems II), and with respect to the new SCCs published by the European Commission and the IDTA and Addendum published by the United Kingdom's Information Commissioner's Office to meet the requirements of GDPR and Schrems II);

(vi) failure to comply with privacy laws and regulations that are extensive, open to various interpretations and complex to implement;

(vii) the Company’s growth and other profitability prospects;

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(xii) the Company’s financial condition and capital requirements;

(xiii) system or network failures or information security, cybersecurity or other data breaches in connection with the Company's offerings or the information technology systems used by the Company generally, the risk of which may be increased during times of natural disaster or pandemic (including COVID-19) due to remote working arrangements;

(xiii) system or network failures or information security, cybersecurity or other data breaches in connection with the Company’s offerings or the information technology systems used by the Company generally, the risk of which may be increased during times of natural disaster or pandemic due to remote working arrangements;

(xiv) failure to achieve our environmental goals on energy consumption, waste diversion and greenhouse gas emissions or our targets relating to ED&I initiatives;

and (xv) failure to attract and retain key personnel to develop and effectively manage the Company's business.

(xv) failure to attract and retain key personnel to develop and effectively manage the Company’s business;

and (xvi) the ability of the Company’s subsidiaries to make distributions to the Company.

Readers should carefully review Part I, Item 1A “Risk Factors” and other documents we file from time to time with the Securities and Exchange Commission (SEC) and other securities regulators.

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At OpenText, we believe information and knowledge make business and people better.

We are an Information Management company that provides software and services that empower digital businesses of all sizes to become more intelligent, secure and connected.

We are an Information Management company that provides software and services that empower digital businesses of all sizes to become more intelligent, connected, secure and responsible.

Our innovations maximize the strategic benefits of data and content for our customers, strengthening their productivity, growth and competitive advantage.

Our comprehensive Information Management platform and services provide secure and scalable solutions for global companies, SMBs, governments and consumers around the world.

We have a complete and integrated portfolio of Information Management solutions delivered at scale in the OpenText Cloud, helping organizations master modern work, power modern experiences and optimize their digital supply chains.

To do this, we bring together our Content Cloud, Business Network Cloud, Experience Cloud, Security Cloud and Developer Cloud.

Our comprehensive Information Management platform and services provide secure and scalable solutions for global companies, small and medium-sized businesses (SMBs), governments and consumers around the world.

We have a complete and integrated portfolio of Information Management solutions delivered at scale in the OpenText Cloud, helping organizations master modern work, automate application delivery and modernization, and optimize their digital supply chains.

To do this, we bring together our Content Cloud, Cybersecurity Cloud, Business Network Cloud, IT Operations Management Cloud, Application Automation Cloud and Analytics & AI Cloud.

We also accelerate information modernization with intelligent tools and services for moving off paper, automating classification and building clean data lakes for Artificial Intelligence (AI), analytics and automation.

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Through automation and AI, we connect, synthesize and deliver information where it is needed to drive new efficiencies, experiences and insights.

We make information more valuable by connecting it to digital business processes, enriching it with capture and analytics, protecting and securing it throughout its entire lifecycle, and leveraging it to create engaging digital experiences.

Our solutions also connect large digital supply chains in manufacturing, retail and financial services.

We make information more valuable by connecting it to digital business processes, enriching it with analytics, protecting and securing it throughout its entire lifecycle, and leveraging it to create engaging experiences for employees, suppliers, developers, partners, and customers.

Our solutions range from connecting large digital supply chains to managing HR processes to driving better IT service management in manufacturing, retail and financial services.

Our solutions also enable organizations and consumers to secure their information so that they can collaborate with confidence, stay ahead of the regulatory technology curve, identify threats on any endpoint or across their networks, enable privacy, leverage eDiscovery and digital forensics to defensibly investigate and collect evidence, and ensure business continuity in the event of a security incident.

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Our ticker symbol on both the NASDAQ and the TSX is “OTEX.”

As of June 30, 2022, we employed a total of approximately 14,800 individuals, of which 7,150 or 49% are in the Americas, 2,720 or 18% are in EMEA and 4,930 or 33% are in Asia Pacific.

As of June 30, 2023, we employed a total of approximately 24,100 individuals, of which approximately 9,700 joined our workforce as part of the Micro Focus Acquisition.

Of the total 24,100 individuals we employed as of June 30, 2023, 9,050 or 38% are in the Americas, 5,750 or 24% are in EMEA and 9,300 or 38% are in Asia Pacific.

Currently, we have employees in 45 countries enabling strong access to multiple talent pools while ensuring reach and proximity to our customers.

Please see “Results of Operations” below for our definitions of geographic regions.

Period-over-period comparisons presented here are significantly impacted by our Micro Focus Acquisition.

Fiscal 2023 Summary:

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up 32.2% after factoring in the unfavorable impact of $132.4 million of foreign exchange rate changes.

The Micro Focus Acquisition contributed $976.5 million of revenues.

• Total annual recurring revenue, which we define as the sum of cloud services and subscriptions revenue and customer support revenue, was $3,615.5 million, up 26.2% compared to the prior fiscal year;

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• GAAP-based net income attributable to OpenText was $150.4 million compared to $397.1 million in the prior fiscal year.

The Micro Focus Acquisition contributed $94.7 million of GAAP-based net losses.

• Non-GAAP-based net income attributable to OpenText was $890.7 million compared to $876.2 million in the prior fiscal year.

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• Adjusted EBITDA, a non-GAAP measure, was $1,472.9 million compared to $1,265.0 million in the prior fiscal year.

• Operating cash flow was $981.8 million for the year ended June 30, 2022 compared to $876.1 million in the prior fiscal year, up 12.1%.

• Operating cash flow was $779.2 million for the year ended June 30, 2023, compared to $981.8 million in the prior fiscal year, down 20.6%.

• Cash and cash equivalents were $1,231.6 million as of June 30, 2023, compared to $1,693.7 million as of June 30, 2022.

• Enterprise cloud bookings was $465.8 million for the year ended June 30, 2022.

We define Enterprise cloud bookings as the total value from cloud services and subscription contracts entered into in the fiscal year that are new, committed and incremental to our existing contracts, excluding the impact of Carbonite and Zix.

• Acquired Micro Focus for total consideration of $6.2 billion, inclusive of Micro Focus’ cash, subject to final adjustments.

• In connection with the financing of the Micro Focus Acquisition, we drew down the entire $3.585 billion of the Acquisition Term Loan (as defined below), issued $1 billion of Senior Secured Notes 2027 (as defined below) and drew down $450 million under the Revolver (as defined below).

Subsequent to the closing of the Micro Focus Acquisition we repaid $175 million of the outstanding balance on the Revolver during the year ended June 30, 2023 and subsequently repaid $175 million on July 5, 2023.

• Enterprise cloud bookings were $527.7 million for the year ended June 30, 2023, compared to $482.0 million for the year ended June 30, 2022.

See “Use of Non-GAAP Financial Measures” below for definitions and reconciliations of GAAP-based measures to Non-GAAP-based measures.

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As a result of the continually changing marketplace in which we operate, we regularly evaluate acquisition opportunities within our market and at any time may be in various stages of discussions with respect to such opportunities.

Acquisition of Zix Corporation

On December 23, 2021, we acquired all of the equity interest in Zix Corporation (Zix), a leader in software as a service (SaaS) based email encryption, threat protection and compliance cloud solutions for SMBs.

Total consideration for Zix was $894.5 million paid in cash, inclusive of $38.3 million of cash acquired and $18.6 million relating to the cash settlement of pre-acquisition vested share-based compensation.

We believe the acquisition increases our position in the data protection, threat management, email security and compliance solutions spaces.

The results of operations of Zix have been consolidated with those of OpenText beginning December 23, 2021.

Acquisition of Bricata Inc.

On November 24, 2021, we acquired all of the equity interest in Bricata Inc.

(Bricata) for $17.8 million.

We believe the acquisition strengthens our OpenText Security Cloud with Network Detection and Response technologies.

The results of operations of Bricata have been consolidated with those of OpenText beginning November 24, 2021.

We believe our acquisitions support our long-term strategic direction, strengthen our competitive position, expand our customer base, provide greater scale to accelerate innovation, grow our earnings and provide superior shareholder value.

We expect to continue to strategically acquire companies, products, services and technologies to augment our existing business.

Our acquisitions, particularly significant ones, can affect the period-to-period comparability of our results.

Acquisition of Micro Focus

On January 31, 2023, we acquired all of the issued and to be issued share capital of Micro Focus for a total purchase price of $6.2 billion, inclusive of Micro Focus’ cash and repayment of Micro Focus’ outstanding indebtedness, subject to final adjustments.

In connection with the financing of the Micro Focus Acquisition, concurrent with the announcement of the acquisition on August 25, 2022, the Company entered into the Acquisition Term Loan and Bridge Loan (as defined below) as well as certain derivative transactions.

On December 1, 2022, the Company issued and sold $1 billion in aggregate principal amount of 6.90% Senior Secured Notes due 2027 (Senior Secured Notes 2027), amended the Acquisition Term Loan and terminated the Bridge Loan.

On January 31, 2023, we drew down the entire aggregate principal amount of $3.585 billion of the Acquisition Term Loan, net of original issuance discount and other fees, and drew down $450 million under the Revolver.

We used these proceeds and cash on hand to fund the purchase price consideration and repayment of Micro Focus’ outstanding indebtedness.

In conjunction with the closing of the Micro Focus Acquisition, the deal-contingent forward contracts and non-contingent forward contract, as described in Note 17 “Derivative Instruments and Hedging Activities” to our Consolidated Financial Statements were settled.

See Note 19 “Acquisitions” to our Consolidated Financial Statements for more details.

Impacts of COVID-19

In March 2020, COVID-19 was characterized as a pandemic by the World Health Organization.

The spread of COVID-19 has significantly impacted the global economy and has adversely impacted and may continue to adversely impact our operational and financial performance.

The extent of the adverse impact of the pandemic on the global economy and markets will continue to depend, in part, on the length and severity of the measures taken to limit the spread of the virus, the availability, effectiveness and use of treatments and vaccines and on actual and potential resurgences.

We are closely monitoring the potential effects and impact on our operations, businesses and financial performance, including liquidity and capital usage, though the extent is difficult to fully predict due to the evolution of this uncertain situation.

We continue to conduct business with modifications to employee travel and work locations and also virtualization of certain events, along with modified interactions with customers and suppliers, among other modifications.

In addition, as many local governments and officials have started lifting pandemic restrictions in accordance with the guidance of public health experts, in July 2022, we implemented a Flex-Office program in which a majority of our employees work a portion of their time in the office and a portion remotely.

See “We have implemented a Flex-Office program, which will subject us to certain operational challenges and risks” in Part I, Item 1A “Risk Factors” included elsewhere within this Annual Report on Form 10-K.

We will continue to actively monitor the impact of the COVID-19 pandemic on all aspects of our business and geographies, including customer purchasing decisions, and may take further actions that alter our business operations, including our Flex-Office program, as may be required by governments, or that we determine are in the best interest of our employees, customers, partners, suppliers and shareholders.

It is uncertain and difficult to predict what the potential effects any such alterations or

modifications may have on our business including the effects on our customers and prospects, or our financial results and our ability to successfully execute our business strategies and initiatives.

The ongoing and ultimate impact of the COVID-19 pandemic on our operations and financial performance depends on many factors that are not within our control.

For more information, please see Part I, Item 1A “Risk Factors” included elsewhere within this Annual Report on Form 10-K.

The Micro Focus Acquisition has contributed to the growth in our revenues and significantly impacts period-over-period comparability.

Impacts of Russia-Ukraine Conflict

In response to the Russia-Ukraine conflict, we have ceased all direct business in Russia and Belarus and with known Russian-owned companies.

Sanctions and export controls have also been imposed by the United States, Canada and other countries in connection with Russia's military actions in Ukraine including restrictions on selling or exporting goods, services or technology to certain regions, and travel bans and asset freezes impacting political, military, business and financial organizations and individuals in or connected with Russia.

We have ceased all direct business in Russia and Belarus and with known Russian-owned companies.

To support certain of our cloud customers headquartered in the United States or allied countries that rely on our network to manage their global business (including their business in Russia), we have nonetheless allowed these customers to continue to use our services to the extent that it can be done in strict compliance with all applicable sanctions and export controls.

However, we may adjust our business practices as required by applicable rules and regulations.

Our compliance with sanctions and export controls could impact the fulfillment of certain contracts with customers and partners doing business in these affected areas and future revenue streams from impacted parties and certain countries.

While we do not expect our decision to cease all direct business in Russia and Belarus and with known Russian-owned companies to have a material adverse effect on our overall business, results of operations or financial condition, it is not possible to predict the broader consequences of this conflict, including adverse effects on the global economy, on our business and operations as well as those of our customers, partners and third party service providers.

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Outlook for Fiscal 2024

As an organization, we are committed to “Total Growth”, meaning we strive towards delivering value through organic initiatives, innovations and acquisitions, as well as financial performance.

With an emphasis on increasing recurring revenues and expanding our margins, we believe our Total Growth strategy will ultimately drive overall cash flow generation, thus helping to fuel our disciplined capital allocation approach and further our ability to deepen our account coverage and identify and execute strategic acquisitions.

As an organization, we are committed to “Total Growth”, meaning we strive towards delivering value through organic initiatives, innovations and acquisitions.

With an emphasis on increasing recurring revenues and expanding profitability, we

believe our Total Growth strategy will ultimately drive cash flow growth, thus helping to fuel our innovation, broaden our go-to-market distribution and identify and execute strategic acquisitions.

With strategic acquisitions, we are well positioned to expand our product portfolio and improve our ability to innovate and grow organically, which helps us to meet our long-term growth targets.

We believe our Total Growth strategy is a durable model, that we believe will create both near and long-term shareholder value through organic and acquired growth, capital efficiency and profitability.

Our Total Growth strategy is a durable model, that we believe will create both near and long-term shareholder value through organic and acquired growth, capital efficiency and profitability.

We are committed to continuous innovation.

Our investments in R&D push product innovation, increasing the value of our offerings to our installed customer base, which includes Global 10,000 companies (G10K), SMB and consumers.

The G10K are the world's largest companies, ranked by estimated total revenues, as well as the world's largest governments and organizations.

Our investments in research and development (R&D) push product innovation, increasing the value of our offerings to our existing customer base and new customers, which includes Global 10,000 companies (G10K), SMBs and consumers.

The G10K are the world’s largest companies, ranked by estimated total revenues, as well as the world's largest governments and global organizations.

More valuable products, coupled with our established global partner program, lead to greater distribution and cross-selling opportunities which further help us to achieve organic growth.

Over the last three fiscal years, we have invested a cumulative total of $1.54 billion in R&D or 13.6% of cumulative revenue for that three-year period.

On an annual basis, we target to spend 12% to 14% of revenues for R&D expense.

Looking ahead, the destination for innovation is indisputably the cloud.

On an annual basis, we continue to target to spend 14% to 16% of revenues on R&D expense.

With our innovation roadmap delivered, we believe we have fortified our support for customer choice:

private cloud, public cloud, off-cloud, and API cloud.

Looking ahead, the destination for innovation is cloud.

Businesses of all sizes rely on a combination of public and private clouds, managed services and off-cloud solutions.

As a result, we are committed to continue to modernize our technology infrastructure and leverage our existing investments in the OpenText Cloud.

As a result, we are committed to continue to modernize our technology infrastructure and leverage our existing investments in the OpenText Cloud and programs to help customers off-cloud.

The combination of OpenText cloud-native applications and managed services, together with the scalability and performance of our partner public cloud providers, offer more secure, reliable and compliant solutions to customers wanting to deploy cloud-based Information Management applications.

The OpenText Cloud is designed to build additional flexibility and scalability for our customers:

becoming cloud-native, connecting anything, and extending capabilities quickly with multi-tenant SaaS applications and services.

We will continue to closely monitor the potential impacts of COVID-19, inflation with respect to wages, services and goods, concerns regarding any potential recession, rising interest rates, financial market volatility, and the Russia-Ukraine conflict on our business.

becoming cloud-native, connecting anything, and extending capabilities with multi-tenant SaaS applications and services.

The completion of the Micro Focus Acquisition during Fiscal 2023 has substantially expanded our scope and size by adding substantial assets and operations to our existing business.

During Fiscal 2023, we incurred significant transaction costs in connection with the Micro Focus Acquisition.

We have incurred and will continue to incur additional integration costs.

As part of the Micro Focus Acquisition, the Company made a strategic decision to implement a restructuring plan that impacted its global workforce and further reduce its real estate footprint around the world in an effort to further streamline our operations, consistent with previously announced cost synergies of $400 million (Micro Focus Acquisition Restructuring Plan).

The total size of the plan is expected to result in a reduction in the combined workforce of approximately 8%, or 2,000 employees, with an estimated cost of $135.0 million to $150.0 million, of which we incurred $72.3 million during Fiscal 2023.

We expect the Micro Focus Acquisition Restructuring Plan to be completed by the end of Fiscal 2024.

See also Part I, Item 1A, “Risk Factors” included within this Annual Report on Form 10-K.

The Micro Focus Acquisition has a significant impact on period-over-period comparability as more fully discussed below.

We will continue to closely monitor the potential impacts of inflation with respect to wages, services and goods, concerns regarding any potential recession, rising interest rates, financial market volatility, and the Russia-Ukraine conflict on our business.

See Part I, Item 1A, “Risk Factors” included within this Annual Report on Form 10-K.

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These estimates, judgments and assumptions are evaluated on an ongoing basis.

We base our estimates on historical experience and on various other

assumptions that we believe are reasonable at that time.

We base our estimates on historical experience and on various other assumptions that we believe are reasonable at that time.

Actual results may differ materially from those estimates.

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For a full discussion of all our accounting policies, please see Note 2 “Accounting Policies and Recent Accounting Pronouncements” to the Consolidated Financial Statements included in this Annual Report on Form 10-K.

We will continue to monitor the potential impact of COVID-19 on our financial statements and related disclosures, including the need for additional estimates going forward, which could include costs related to items such as special charges, restructurings, asset impairments and other non-recurring costs.

As of June 30, 2022, we have recorded certain estimates in our Consolidated Financial Statements resulting from the pandemic, particularly with respect to the COVID-19 Restructuring Plan, based on management's estimates and assumptions utilizing the most currently available information.

Such estimates may be subject to change particularly given the unprecedented nature of the COVID-19 pandemic.

Please also see Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K.

Revenue recognition

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Cloud services and subscriptions revenue

Cloud services and subscriptions revenue are from hosting arrangements where, in connection with the licensing of software, the end user does not take possession of the software, as well as from end-to-end fully outsourced B2B integration solutions to our customers (collectively referred to as cloud arrangements).

Cloud services and subscriptions revenue are from hosting arrangements where, in connection with the licensing of software, the end user does not take possession of the software, as well as from end-to-end fully outsourced business-to-business (B2B) integration solutions to our customers (collectively referred to as cloud arrangements).

The software application resides on our hardware or that of a third party, and the customer accesses and uses the software on an as-needed basis.

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These outsourced professional services are considered distinct from the ongoing hosting services and represent a separate performance obligation within our cloud subscription or managed services arrangements.

The obligation to provide outsourced professional services is satisfied over time, with the customer simultaneously receiving and consuming the benefits as we satisfy our performance obligations.

The obligation to provide outsourced professional services is satisfied over

time, with the customer simultaneously receiving and consuming the benefits as we satisfy our performance obligations.

For outsourced professional services, we recognize revenue by measuring progress toward the satisfaction of our performance obligation.

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Like perpetual licenses, both our term licenses and subscription licenses are functional IP that have significant stand-alone functionality.

Accordingly, for both term and subscription licenses, revenue

is recognized at the point-in-time when the customer is able to use and benefit from the software, which is normally once software activation keys have been made available for download at the commencement of the term.

Accordingly, for both term and subscription licenses, revenue is recognized at the point-in-time when the customer is able to use and benefit from the software, which is normally once software activation keys have been made available for download at the commencement of the term.

Professional service and other revenue

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Estimating SSP requires judgment that could impact the amount and timing of revenue recognized.

SSP is a formal

process whereby management considers multiple factors including, but not limited to, geographic or region-specific factors, competitive positioning, internal costs, profit objectives and pricing practices.

SSP is a formal process whereby management considers multiple factors including, but not limited to, geographic or region-specific factors, competitive positioning, internal costs, profit objectives and pricing practices.

Transaction Price Allocation

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We use the residual approach only for our license arrangements.

When the SSP is observable but contractual pricing does not fall within our established SSP range, then an adjustment is required, and we will allocate the transaction price between license and customer support at a constant ratio reflecting the mid-point of the established SSP range.

When the SSP is observable but contractual pricing does not fall within our established SSP range, then an adjustment is required, and we will allocate the transaction price between license and customer support based on the relative SSP established for the respective performance obligations.

When two or more contracts are entered into at or near the same time with the same customer, we evaluate the facts and circumstances associated with the negotiation of those contracts.

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The tax position is derecognized when it is no longer more likely than not that the position will be sustained on audit.

On subsequent recognition and measurement, the maximum amount which is more likely than not to be recognized at each reporting date will represent the Company's best estimate, given the information available at the reporting date, although the outcome of the tax position is not absolute or final.

On subsequent recognition and measurement, the maximum amount which is more likely than not to be recognized at each reporting date will represent the Company’s best

estimate, given the information available at the reporting date, although the outcome of the tax position is not absolute or final.

We recognize both accrued interest and penalties related to liabilities for income taxes within the “Provision for (recovery of) income taxes” line of our Consolidated Statements of Income.

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See “Use of Non-GAAP Financial Measures” below for a reconciliation of GAAP-based measures to Non-GAAP-based measures.

The comparability of our operating results for the year ended June 30, 2023 as compared to the year ended June 30, 2022 was impacted by the recent Micro Focus Acquisition.

Our total revenues increased by $991.1 million across all of our product types in the year ended June 30, 2023, relative to the year ended June 30, 2022, primarily due to revenue contributions from the Micro Focus Acquisition, offset by unfavorable impact of $132.4 million of foreign exchange rate changes.

The Micro Focus Acquisition contributed $976.5 million to our total revenues during the year ended June 30, 2023, of which $629.1 million related to customer support revenues and $219.6 million related to license revenues.

Total cost of revenues increased by $254.4 million in the year ended June 30, 2023, relative to the year ended June 30, 2022, primarily from additional cost of revenues of $279.3 million as a result of the Micro Focus Acquisition.

Total operating expenses increased by $865.2 million in the year ended June 30, 2023, relative to the year ended June 30, 2022, primarily from additional operating expenses of $761.5 million as a result of the Micro Focus Acquisition, of which $550.4 million was related to research and development, sales and marketing, and general and administrative expenses.

Summary of Results of Operations

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Our cloud arrangements can be broadly categorized as PaaS, SaaS, cloud subscriptions and managed services.

For the year ended June 30, 2022, our cloud renewal rate, excluding the impact of Carbonite and Zix, was approximately 94% compared to approximately 93% for the year ended June 30, 2021.

For the year ended June 30, 2023, our cloud renewal rate, excluding the impact of Carbonite, Zix and Micro Focus was approximately 94%, consistent with the year ended June 30, 2022.

Cost of Cloud services and subscriptions revenues is comprised primarily of third-party network usage fees, maintenance of in-house data hardware centers, technical support personnel-related costs and some third party royalty costs.

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up 13.3% after factoring in the unfavorable impact of $38.6 million of foreign exchange rate changes.

The increase was primarily driven by the impact of recent acquisitions, along with organic growth over the comparative period.

The increase was primarily driven by organic revenue growth, as well as partially driven by incremental revenues from the Micro Focus Acquisition over the comparative period.

Geographically, the overall change was attributable to an increase in Americas of $131.8 million, an increase in EMEA of $30.5 million and an increase in Asia Pacific of $3.1 million.

1 unchanged sentence

Cost of Cloud services and subscriptions revenues increased by $78.5 million during the year ended June 30, 2023 as compared to the prior fiscal year.

This was primarily due to an increase in third party network usage fees of $19.9 million, an increase in labour-related costs of $8.1 million and an increase in payroll taxes of $1.5 million.

Overall, the gross margin percentage on Cloud services and subscriptions revenues increased to 67% from 66%.

This was primarily due to an increase in labour-related costs of $40.0 million and an increase in third-party network usage fees of $37.8 million partially driven by incremental Cloud services and subscriptions cost of revenues from the Micro Focus Acquisition over the comparative period.

Overall, the gross margin percentage on Cloud services and subscriptions revenues decreased to 65% from 67%.

2) Customer Support:

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Our management reviews our Customer support renewal rates on a quarterly basis, and we use these rates as a method of monitoring our customer service performance.

For the year ended June 30, 2022, our Customer support renewal rate was approximately 94%, consistent with the year ended June 30, 2021.

For the year ended June 30, 2023, our Customer support renewal rate was approximately 95%, compared to approximately 94% for the year ended June 30, 2022, excluding the impact of Carbonite, Zix and Micro Focus.

Cost of Customer support revenues is comprised primarily of technical support personnel and related costs, as well as third party royalty costs.

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Asia Pacific 8.9 % 8.4 % 8.2 %

Customer support revenues decreased by $3.1 million or 0.2% during the year ended June 30, 2022 as compared to the prior fiscal year;

Customer support revenues increased by $584.1 million or 43.9% during the year ended June 30, 2023 as compared to the prior fiscal year;

up 48.7% after factoring in the unfavorable impact of $63.8 million of foreign exchange rate changes.

Geographically, the overall change was attributable to a decrease in EMEA of $5.9 million and a decrease in Americas of $0.2 million, partially offset by an increase in Asia Pacific of $3.0 million.

Cost of Customer support revenues decreased by $1.3 million during the year ended June 30, 2022 as compared to the prior fiscal year.

This was primarily due to a decrease in labour-related costs of $1.9 million and a decrease in third party network usage fees of $0.3 million, partially offset by an increase in other miscellaneous costs of $1.0 million.

Overall, the gross margin percentage on Customer support revenues remained stable at 91%.

The increase was primarily driven by incremental Customer support revenues from the Micro Focus Acquisition over the comparative period.

Geographically, the overall change was attributable to an increase in Americas of $337.7 million, an increase in EMEA of $186.9 million and an increase in Asia Pacific of $59.4 million.

Cost of Customer support revenues increased by $88.2 million during the year ended June 30, 2023 as compared to the prior fiscal year.

This was primarily due to an increase in labour-related costs of $82.2 million and an increase in third-party network usage fees of $5.5 million driven by incremental Customer support cost of revenues from the Micro Focus Acquisition over the comparative period.

Overall, the gross margin percentage on Customer support revenues decreased to 89% from 91%.

Our License revenue can be broadly categorized as perpetual licenses, term licenses and subscription licenses.

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Asia Pacific 12.8 % 9.2 % 12.1 %

License revenues decreased by $26.4 million or 6.9% during the year ended June 30, 2022 as compared to the prior fiscal year;

down 4.6% after factoring in the unfavorable impact of $8.7 million of foreign exchange rate changes.

Geographically, the overall change was attributable to a decrease in EMEA of $16.8 million and a decrease in Asia Pacific of $13.8 million, partially offset by an increase in Americas of $4.2 million.

License revenues increased by $180.7 million or 50.4% during the year ended June 30, 2023 as compared to the prior fiscal year;

up 55.0% after factoring in the unfavorable impact of $16.4 million of foreign exchange rate changes.

The increase was primarily driven by incremental License revenues from the Micro Focus Acquisition over the comparative period.

Geographically, the overall change was attributable to an increase in Americas of $107.1 million, an increase in EMEA of $37.9 million and an increase in Asia Pacific of $35.7 million.

During Fiscal 2023, we closed 163 license contracts greater than $0.5 million, of which 71 contracts were greater than $1.0 million, contributing $211.3 million of License revenues.

This was compared to 122 license contracts greater than $0.5 million during Fiscal 2022, of which 46 contracts were greater than $1.0 million, contributing $131.7 million of License revenues.

Cost of License revenues decreased by $0.4 million during the year ended June 30, 2022 as compared to the prior fiscal year as a result of lower third-party technology costs.

Overall, the gross margin percentage on License revenues remained stable at 96%.

Cost of License revenues increased by $3.1 million during the year ended June 30, 2023 as compared to the prior fiscal year as a result of higher third-party technology costs primarily driven by incremental cost of License revenues from the Micro Focus Acquisition over the comparative period.

Overall, the gross margin percentage on License revenues increased to 97% from 96%.

4) Professional Service and Other:

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up 27.7% after factoring in the unfavorable impact of $13.6 million of foreign exchange rate changes.

Geographically, the overall change was attributable to an increase in Americas of $7.1 million and an increase in Asia Pacific of $3.9 million, partially offset by a decrease in EMEA of $1.4 million.

The increase was primarily driven by incremental Professional service and other revenues from the Micro Focus Acquisition over the comparative period.

Geographically, the overall change was attributable to an increase in EMEA of $28.5 million, an increase in Americas of $20.8 million and an increase in Asia Pacific of $11.7 million.

Cost of Professional service and other revenues increased by $60.0 million during the year ended June 30, 2023 as compared to the prior fiscal year.

This was primarily due to an increase in labour-related costs of $19.4 million and an increase in other miscellaneous costs of $0.3 million.

This was primarily due to an increase in labour-related costs of $58.1 million primarily driven by the incremental Professional service and other cost of revenues from the Micro Focus Acquisition over the comparative period.

Overall, the gross margin percentage on Professional service and other revenues decreased to 16% from 20%.

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Amortization of acquired technology-based intangible assets $ 223,184 $ 24,577 $ 198,607 $ (20,189) $ 218,796

Amortization of acquired technology-based intangible assets decreased during the year ended June 30, 2022 by $20.2 million as compared to the prior fiscal year.

This was due to a reduction of $27.9 million relating to intangible assets from previous acquisitions becoming fully amortized, partially offset by an increase of $7.7 million relating to amortization of newly acquired customer-based intangible assets from recent acquisitions.

Amortization of acquired technology-based intangible assets increased during the year ended June 30, 2023 by $24.6 million as compared to the prior fiscal year.

This was due to an increase of $91.2 million relating to amortization of newly acquired technology-based intangible assets from the Micro Focus Acquisition, partly offset by a reduction of $68.8 million related to technology-based intangible assets from previous acquisitions becoming fully amortized.

Operating Expenses

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(In thousands)

2022 and 2021 2021 and 2020

2023 and 2022

2022 and 2021

Payroll and payroll-related benefits $ 152,915 $ 17,070

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Total change in research and development expenses $ 240,139 $ 19,001

Research and development expenses increased by $19 million during the year ended June 30, 2022 as compared to the prior fiscal year, primarily as a result of recent acquisitions.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $17.1 million.

Additionally, share-based compensation expense increased by $7.3 million and contract labour and consulting increased by $2.6 million.

These increases were partially offset by reductions in facility-related expenses of $9.1 million.

Overall, our research and development expenses, as a percentage of total revenues, remained stable compared to the prior fiscal year at 13%.

Research and development expenses increased by $240.1 million during the year ended June 30, 2023 as compared to the prior fiscal year, primarily as a result of the Micro Focus Acquisition.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $152.9 million, facility-related expenses increased by $45.8 million, share-based compensation expense increased by $22.0 million and contract labour and consulting increased by $14.7 million.

Overall, our research and development expenses, as a percentage of total revenues, increased to 15% compared to the prior fiscal year at 13%.

Our research and development labour resources increased by 3,953 employees, from 4,326 employees at June 30, 2022 to 8,279 employees at June 30, 2023.

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Total change in sales and marketing expenses $ 271,480 $ 54,897

Sales and marketing expenses increased by $54.9 million during the year ended June 30, 2022 as compared to the prior fiscal year, partially as a result of recent acquisitions.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $38.6 million.

Additionally, marketing expenses increased by $9.6 million, commissions increased by $7.0 million, other miscellaneous costs increased by $4.6 million, share-based compensation expense increased by $4.3 million and travel and communication expenses increased by $3.8 million.

These increases were partially offset by reductions in credit loss expense of $9.0 million and reductions in facility-related expenses of $4.0 million.

Overall, our sales and marketing expenses, as a percentage of total revenues, increased to 19% from 18% the prior fiscal year.

Sales and marketing expenses increased by $271.5 million during the year ended June 30, 2023 as compared to the prior fiscal year, primarily as a result of the Micro Focus Acquisition.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $136.3 million, commissions increased by $38.1 million, marketing expenses increased by $29.1 million, facility-related expenses increased by $23.2 million, share-based compensation expense increased by $19.1 million and travel and communication expenses increased by $13.3 million.

Overall, our sales and marketing expenses, as a percentage of total revenues, increased to 21% compared to the prior fiscal year at 19%.

Our sales and marketing labour resources increased by 2,105 employees, from 2,710 employees at June 30, 2022 to 4,815 employees at June 30, 2023.

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Total change in general and administrative expenses $ 102,505 $ 53,564

General and administrative expenses increased by $53.6 million during the year ended June 30, 2022 as compared to the prior fiscal year, partially as a result of recent acquisitions.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $47.8 million.

Additionally, travel and communication expenses increased by $5.8 million, contract labour and consulting increased by $5.3 million and share-based compensation expense increased by $2.5 million.

These increases were partially offset by reductions in other miscellaneous costs, which include professional fees such as legal, audit and tax related expenses, of $8.2 million.

Overall, general and administrative expenses, as a percentage of total revenues, increased to 9% from 8% in the prior fiscal year.

Our general and administrative labour resources increased by 105 employees, from 1,866 employees at June 30, 2021 to 1,971 employees at June 30, 2022.

General and administrative expenses increased by $102.5 million during the year ended June 30, 2023 as compared to the prior fiscal year, primarily as a result of the Micro Focus Acquisition.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $50.7 million, contract labour and consulting increased by $15.8 million, other miscellaneous costs, which include professional fees such as legal, audit, and tax related expenses increased by $13.6 million, share-based compensation expense increased by $9.9 million and travel and communication expenses increased by $9.1 million.

Overall, general and administrative expenses, as a percentage of total revenues, remained stable at 9% in both fiscal years.

Our general and administrative labour resources increased by 1,425 employees, from 1,971 employees at June 30, 2022 to 3,396 employees at June 30, 2023, primarily as a result of the Micro Focus Acquisition.

Depreciation expenses:

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Depreciation $ 107,761 $ 19,520 $ 88,241 $ 2,976 $ 85,265

Depreciation expenses increased during the year ended June 30, 2022 by $3.0 million compared to the prior fiscal year.

Depreciation expenses increased during the year ended June 30, 2023 by $19.5 million compared to the prior fiscal year, primarily as a result of the Micro Focus Acquisition.

Depreciation expenses as a percentage of total revenue remained stable for the year ended June 30, 2023 at 2% compared to the prior fiscal year.

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Amortization of acquired customer-based intangible assets increased during the year ended June 30, 2023 by $109.3 million as compared to the prior fiscal year.

This was due to an increase of $9.4 million relating to amortization of newly acquired customer-based intangible assets from recent acquisitions, partially offset by a reduction of $8.8 million relating to intangible assets from previous acquisitions becoming fully amortized.

This was due to an increase of $111.2 million relating to amortization of newly acquired customer-based intangible assets from the Micro Focus Acquisition, partly offset by a reduction of $9.8 million related to customer-based intangible assets from previous acquisitions becoming fully amortized.

Special charges (recoveries):

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Special charges (recoveries) increased by $122.3 million during the year ended June 30, 2023 as compared to the prior fiscal year.

This was primarily due to an increase in restructuring activities of $27.2 million related to abandoned facilities and a decrease in comparative period recoveries for the Fiscal 2022 Restructuring Plan, COVID-19 Restructuring Plan and Fiscal 2020 Restructuring Plan.

Additionally, acquisition related costs increased by $1.0 million and other miscellaneous charges increased by $17.0 million, primarily driven by pre-acquisition equity incentives, which upon acquisition were replaced by equivalent value cash settlements (see Note 19 “Acquisitions” to our Consolidated Financial Statements) compared to the same period in the prior fiscal year.

Restructuring activities increased by $55.5 million driven by the Micro Focus Restructuring Plan, acquisition related costs increased by $42.1 million primarily due to the Micro Focus Acquisition and other miscellaneous charges increased by $24.7 million, primarily driven by severance charges related to the Micro Focus Acquisition.

For more details on Special charges (recoveries), see Note 18 “Special Charges (Recoveries)” to our Consolidated Financial Statements.

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$ 56,599 $ 59,269 $ (2,670) $ (1,397) $ (1,273)

Unrealized losses on derivatives not designated as hedges (2)

(128,841) (128,841) — — —

Realized gains on derivatives not designated as hedges (3)

137,471 137,471 — — —

OpenText share in net income (loss) of equity investees (4)

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__________________________

(1) Represents our share in net income of equity investees, which approximates fair value and subject to volatility based on market trends and business conditions, based on our interest in certain investment funds in which we are a limited partner.

(1) The year ended June 30, 2023 includes a foreign exchange gain of $36.6 million resulting from the delayed payment of a portion of the purchase consideration, settled on February 9, 2023, related to the Micro Focus Acquisition (see Note 19 “Acquisitions” to our Consolidated Financial Statements for more details).

(2) Represents the unrealized losses on our derivatives not designated as hedges related to the financing of the Micro Focus Acquisition (see Note 17 “Derivative Instruments and Hedging Activities” to our Consolidated Financial Statements for more details).

(3) Represents the realized gains on our derivatives not designated as hedges related to the financing of the Micro Focus Acquisition (see Note 17 “Derivative Instruments and Hedging Activities” to our Consolidated Financial Statements for more details).

(4) Represents our share in net income (loss) of equity investees, which approximates fair value and subject to volatility based on market trends and business conditions, based on our interest in certain investment funds in which we are a limited partner.

Our interests in each of these investees range from 4% to below 20% and these investments are accounted for using the equity method (see Note 9 “Prepaid Expenses and Other Assets” to our Consolidated Financial Statements for more details).

(2) On December 9, 2021, we redeemed Senior Notes 2026 in full, which resulted in a loss on debt extinguishment of $27.4 million.

(5) On December 1, 2022, we amended the Acquisition Term Loan and Bridge Loan to reallocate commitments under the Bridge Loan to the Acquisition Term Loan and terminated all remaining commitments under the Bridge Loan which resulted in a loss on debt extinguishment related to unamortized debt issuance costs (see Note 11 “Long-Term Debt” to our Consolidated Financial Statements for more details).

(6) On December 9, 2021, we redeemed the Senior Notes 2026 in full, which resulted in a loss on debt extinguishment of $27.4 million.

Of this, $25.0 million related to the early termination call premium, $6.2 million related to unamortized debt issuance costs and ($3.8) million related to unamortized premium (see Note 11 “Long-Term Debt” to our Consolidated Financial Statements for more details).

On March 5, 2020, we redeemed

in full $800 million aggregate principal amount of our 5.625% Senior Notes due 2023 (Senior Notes 2023), which resulted in a loss on debt extinguishment of $17.9 million.

Of this, $6.7 million related to unamortized debt issuance costs and the remaining $11.2 million related to the early termination call premium.

Interest and Other Related Expense, Net

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Other miscellaneous expense (2)

19,282 8,334 10,948 1,171 9,777

Total interest and other related expense, net $ 329,428 $ 171,548 $ 157,880 $ 6,313 $ 151,567

1 unchanged sentence

(1) For more details see Note 11 “Long-Term Debt” to our Consolidated Financial Statements.

Provision for Income Taxes

(2) Other miscellaneous expense primarily consists of the amortization of debt discount and the debt issuance costs.

For more details see Note 11 “Long-Term Debt” to our Consolidated Financial Statements.

Provision for (recovery of) Income Taxes

We operate in several tax jurisdictions and are exposed to various foreign tax rates.

3 unchanged sentences

increase (decrease) 2021

Provision for income taxes $ 118,752 $ (221,154) $ 339,906 $ 229,069 $ 110,837

The effective tax rate decreased to a provision of 23.0% for the year ended June 30, 2022, compared to a provision of 52.2% for the year ended June 30, 2021.

Provision for (recovery of) income taxes $ 70,767 $ (47,985) $ 118,752 $ (221,154) $ 339,906

The effective tax rate increased to a provision of 32.0% for the year ended June 30, 2023, compared to a provision of 23.0% for the year ended June 30, 2022.

Tax expense decreased from $118.8 million during the year ended June 30, 2022 to $70.8 million during the year ended June 30, 2023.

This was primarily due to (i) a decrease of $300.6 million related to Internal Revenue Service (IRS) settlements in Fiscal 2021, (ii) a decrease of $37.5 million related to lower net income before taxes, (iii) a decrease of $10.8 million related to passive income from foreign subsidiaries, (iv) a decrease of $9.6 million related to tax accruals on unremitted earnings and (v) a decrease of $8.0 million for base erosion and anti-abuse tax (BEAT).

These were partially offset by (i) an increase of $94.3 million for changes in unrecognized tax benefits, (ii) a net increase of $46.8 million related to internal reorganizations and (iii) an increase of $3.5 million for change in valuation allowance.

The remainder of the difference was due to normal course movements and non-material items.

For information on certain potential tax contingencies, including the CRA matter, see Note 14 “Guarantees and Contingencies” and Note 15 “Income Taxes” to our Consolidated Financial Statements.

The increase in the effective tax rate was driven by increases in withholding taxes, changes in valuation allowance, permanent differences related to foreign source income inclusions, and the impact of

internal reorganizations, partially offset by lower pretax income, tax credits and permanent adjustments related to the preferential tax treatment of the mark-to-market gains on derivatives.

The tax rate for the year ended June 30, 2022 varied from the statutory rate due favorable permanent adjustments related to excess share-based compensation deductions, tax credits, and the reduction in the accrual on unremitted foreign earnings, partially offset by the impact of internal reorganizations and an increase in unrecognized tax benefits.

Beginning July 1, 2022, as a result of the Tax Cuts and Jobs Act of 2017 (“Tax Act”), our research and development expenditures are now being capitalized and amortized.

For fiscal year 2023, the new regulations resulted in incremental cash tax payments of approximately $68 million.

The actual impact on future cash flows from operations will primarily depend on if or when this legislation is deferred, modified, or repealed by the U.S.

Congress and the amount of R&D expenditures paid or incurred in those respective years.

We estimate the largest potential impact will be related to Fiscal 2023 cash flows fro m operations and that the impact in future years should gradually decrease over the respective amortization periods.

The Inflation Reduction Act and Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act (the Inflation Reduction Act) were signed into law in August 2022.

The Inflation Reduction Act introduced new provisions, including a 15% corporate alternative minimum tax for certain large corporations that have at least an average of $1 billion of adjusted financial statement income over a consecutive three-tax-year period.

The corporate minimum tax will be effective for Fiscal 2024.

We are currently evaluating the applicability and the effect of the new law to our financial results.

For information on certain potential tax contingencies, including the Canada Revenue Agency (CRA) matter, see Note 14 “Guarantees and Contingencies” and Note 15 “Income Taxes” to our Consolidated Financial Statements.

Please also see Part I, Item 1A, “Risk Factors” within this Annual Report on Form 10-K.

Use of Non-GAAP Financial Measures

In addition to reporting financial results in accordance with U.S.

GAAP, the Company provides certain financial measures that are not in accordance with U.S.

GAAP (Non-GAAP).

These Non-GAAP financial measures have certain limitations in that they do not have a standardized meaning and thus the Company's definition may be different from similar Non-GAAP financial measures used by other companies and/or analysts and may differ from period to period.

Thus, it may be more difficult to compare the Company's financial performance to that of other companies.

However, the Company's management compensates for these limitations by providing the relevant disclosure of the items excluded in the calculation of these Non-GAAP financial measures both in its reconciliation to the U.S.

GAAP financial measures and its Consolidated Financial Statements, all of which should be considered when evaluating the Company's results.

The Company uses these Non-GAAP financial measures to supplement the information provided in its Consolidated Financial Statements, which are presented in accordance with U.S.

The presentation of Non-GAAP financial measures is not meant to be a substitute for financial measures presented in accordance with U.S.

GAAP, but rather should be evaluated in conjunction with and as a supplement to such U.S.

GAAP measures.

OpenText strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure.

The Company therefore believes that despite these limitations, it is appropriate to supplement the disclosure of the U.S.

GAAP measures with certain Non-GAAP measures defined below.

Non-GAAP-based net income and Non-GAAP-based EPS, attributable to OpenText, are consistently calculated as GAAP-based net income or earnings per share, attributable to OpenText, on a diluted basis, excluding the effects of the amortization of acquired intangible assets, other income (expense), share-based compensation, and special charges (recoveries), all net of tax and any tax benefits/expense items unrelated to current period income, as further described in the tables below.

Non-GAAP-based gross profit is the arithmetical sum of GAAP-based gross profit and the amortization of acquired technology-based intangible assets and share-based compensation within cost of sales.

Non-GAAP-based gross margin is calculated as Non-GAAP-based gross profit expressed as a percentage of total revenue.

Non-GAAP-based income from operations is calculated as GAAP-based income from operations, excluding the amortization of acquired intangible assets, special charges (recoveries), and share-based compensation expense.

Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) is consistently calculated as GAAP-based net income, attributable to OpenText, excluding interest income (expense), provision for income taxes, depreciation and amortization of acquired intangible assets, other income (expense), share-based compensation and special charges (recoveries).

The Company's management believes that the presentation of the above defined Non-GAAP financial measures provides useful information to investors because they portray the financial results of the Company before the impact of certain non-operational charges.

The use of the term “non-operational charge” is defined for this purpose as an expense that does not impact the ongoing operating decisions taken by the Company's management.

These items are excluded based upon the way the Company's management evaluates the performance of the Company's business for use in the Company's internal reports and are not excluded in the sense that they may be used under U.S.

The Company does not acquire businesses on a predictable cycle, and therefore believes that the presentation of Non-GAAP measures, which in certain cases adjust for the impact of amortization of intangible assets and the related tax effects that are primarily related to acquisitions, will provide readers of financial statements with a more consistent basis for comparison across accounting periods and be more useful in helping readers understand the Company’s operating results and underlying operational trends.

Additionally, the Company has engaged in various restructuring activities over the past several years, primarily due to acquisitions and most recently in response to our return to office planning, that have resulted in costs associated with reductions in headcount, consolidation of leased facilities and related costs, all which are recorded under the Company’s “Special charges (recoveries)” caption on the Consolidated Statements of Income.

Each restructuring activity is a discrete event based on a unique set of business objectives or circumstances, and each differs in terms of its operational implementation, business impact and scope, and the size of each restructuring plan can vary significantly from period to period.

Therefore, the Company believes that the exclusion of these special charges (recoveries) will also better aid readers of financial statements in the understanding and comparability of the Company's operating results and underlying operational trends.

In summary, the Company believes the provision of supplemental Non-GAAP measures allow investors to evaluate the operational and financial performance of the Company's core business using the same evaluation measures that management uses, and is therefore a useful indication of OpenText's performance or expected performance of future operations and facilitates period-to-period comparison of operating performance (although prior performance is not necessarily indicative of future performance).

As a result, the Company considers it appropriate and reasonable to provide, in addition to U.S.

GAAP measures, supplementary Non-GAAP financial measures that exclude certain items from the presentation of its financial results.

The following charts provide unaudited reconciliations of U.S.

GAAP-based financial measures to Non-GAAP-based financial measures for the following periods presented.

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures

for the year ended June 30, 2022

(In thousands, except for per share data)

Year Ended June 30, 2022

GAAP-based Measures GAAP-based Measures

% of Total Revenue Adjustments Note Non-GAAP-based Measures Non-GAAP-based Measures

% of Total Revenue

Cost of revenues

Cloud services and subscriptions $ 511,713 $ (5,285) (1) $ 506,428

Customer support 121,485 (2,399) (1) 119,086

Professional service and other 216,895 (3,740) (1) 213,155

Amortization of acquired technology-based intangible assets 198,607 (198,607) (2) —

GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%) 2,431,643 69.6% 210,031 (3) 2,641,674 75.6%

Operating expenses

Research and development 440,448 (17,122) (1) 423,326

Sales and marketing 677,118 (22,628) (1) 654,490

General and administrative 317,085 (18,382) (1) 298,703

Amortization of acquired customer-based intangible assets 217,105 (217,105) (2) —

Special charges (recoveries) 46,873 (46,873) (4) —

GAAP-based income from operations / Non-GAAP-based income from operations 644,773 532,141 (5) 1,176,914

Other income (expense), net 29,118 (29,118) (6) —

Provision for income taxes 118,752 23,913 (7) 142,665

GAAP-based net income / Non-GAAP-based net income, attributable to OpenText 397,090 479,110 (8) 876,200

GAAP-based EPS / Non-GAAP-based EPS-diluted, attributable to OpenText $ 1.46 $ 1.76 (8) $ 3.22

_________________________________

(1) Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.

(2) Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.

(3) GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of total revenue.

(4) Adjustment relates to the exclusion of special charges (recoveries) from our Non-GAAP-based operating expenses as special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations and are therefore excluded from our internal analysis of operating results.

See Note 18 “Special Charges (Recoveries)” to our Consolidated Financial Statements for more details.

(5) GAAP-based and Non-GAAP-based income from operations stated in dollars.

(6) Adjustment relates to the exclusion of other income (expense) from our Non-GAAP-based operating expenses as other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results.

Other income (expense) also includes our share of income (losses) from our holdings in investments as a limited partner.

We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments.

We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.

(7) Adjustment relates to differences between the GAAP-based tax provision rate of approximately 23% and a Non-GAAP-based tax rate of approximately 14%;

these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based net income.

Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net.

Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves and “book to return” adjustments for tax return filings and tax assessments.

Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period.

In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8) Reconciliation of GAAP-based net income to Non-GAAP-based net income:

Year Ended June 30, 2022

Per share diluted

GAAP-based net income, attributable to OpenText $ 397,090 $ 1.46

Amortization 415,712 1.52

Share-based compensation 69,556 0.26

Special charges (recoveries) 46,873 0.17

Other (income) expense, net (29,118) (0.11)

GAAP-based provision for income taxes 118,752 0.44

Non-GAAP-based provision for income taxes (142,665) (0.52)

Non-GAAP-based net income, attributable to OpenText $ 876,200 $ 3.22

Reconciliation of Adjusted EBITDA

Year Ended June 30, 2022

GAAP-based net income, attributable to OpenText $ 397,090

Provision for income taxes 118,752

Interest and other related expense, net 157,880

Amortization of acquired technology-based intangible assets 198,607

Amortization of acquired customer-based intangible assets 217,105

Depreciation 88,241

Share-based compensation 69,556

Special charges (recoveries) 46,873

Other (income) expense, net (29,118)

Adjusted EBITDA $ 1,264,986

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures

for the year ended June 30, 2021

(In thousands, except for per share data)

Year Ended June 30, 2021

GAAP-based Measures GAAP-based Measures

% of Total Revenue Adjustments Note Non-GAAP-based Measures Non-GAAP-based Measures

% of Total Revenue

Cost of revenues

Cloud services and subscriptions $ 481,818 $ (3,419) (1) $ 478,399

Customer support 122,753 (1,910) (1) 120,843

Professional service and other 197,183 (2,565) (1) 194,618

Amortization of acquired technology-based intangible assets 218,796 (218,796) (2) —

GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%) 2,351,649 69.4% 226,690 (3) 2,578,339 76.1%

Operating expenses

Research and development 421,447 (9,859) (1) 411,588

Sales and marketing 622,221 (18,312) (1) 603,909

General and administrative 263,521 (15,904) (1) 247,617

Amortization of acquired customer-based intangible assets 216,544 (216,544) (2) —

Special charges (recoveries) 1,748 (1,748) (4) —

GAAP-based income from operations / Non-GAAP-based income from operations 740,903 489,057 (5) 1,229,960

Other income (expense), net 61,434 (61,434) (6) —

Provision for income taxes 339,906 (188,931) (7) 150,975

GAAP-based net income / Non-GAAP-based net income, attributable to OpenText 310,672 616,554 (8) 927,226

GAAP-based EPS / Non-GAAP-based EPS-diluted, attributable to OpenText $ 1.14 $ 2.25 (8) $ 3.39

_________________________________________

(1) Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.

(3) GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of total revenue.

See Note 18 “Special Charges (Recoveries)” to our Consolidated Financial Statements for more details.

(5) GAAP-based and Non-GAAP-based income from operations stated in dollars.

Other income (expense) also includes our share of income (losses) from our holdings in investments as a limited partner.

We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments.

We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.

(7) Adjustment relates to differences between the GAAP-based tax provision rate of approximately 52% and a Non-GAAP-based tax rate of approximately 14%;

these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based net income.

Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net.

The GAAP-based tax provision rate for the year ended June 30, 2021 includes an income tax provision charge from IRS settlements partially offset by a tax benefit from the release of unrecognized tax benefits due to the conclusion of relevant tax audits that was recognized during the second quarter of Fiscal 2021.

(8) Reconciliation of GAAP-based net income to Non-GAAP-based net income:

Year Ended June 30, 2021

Per share diluted

GAAP-based net income, attributable to OpenText $ 310,672 $ 1.14

Amortization 435,340 1.59

Share-based compensation 51,969 0.19

Special charges (recoveries) 1,748 0.01

Other (income) expense, net (61,434) (0.22)

GAAP-based provision for income taxes 339,906 1.23

Non-GAAP-based provision for income taxes (150,975) (0.55)

Non-GAAP-based net income, attributable to OpenText $ 927,226 $ 3.39

Reconciliation of Adjusted EBITDA

Year Ended June 30, 2021

GAAP-based net income, attributable to OpenText $ 310,672

Provision for income taxes 339,906

Interest and other related expense, net 151,567

Amortization of acquired technology-based intangible assets 218,796

Amortization of acquired customer-based intangible assets 216,544

Depreciation 85,265

Share-based compensation 51,969

Special charges (recoveries) 1,748

Other (income) expense, net (61,434)

Adjusted EBITDA $ 1,315,033

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures

for the year ended June 30, 2020

(In thousands, except for per share data)

Year Ended June 30, 2020

GAAP-based Measures GAAP-based Measures

% of Total Revenue Adjustments Note Non-GAAP-based Measures Non-GAAP-based Measures

% of Total Revenue

Cost of revenues

Cloud services and subscriptions $ 449,940 $ (1,642) (1) $ 448,298

Customer support 123,894 (1,207) (1) 122,687

Professional service and other 212,903 (1,294) (1) 211,609

Amortization of acquired technology-based intangible assets 205,717 (205,717) (2) —

GAAP-based gross profit and gross margin (%) /

Non-GAAP-based gross profit and gross margin (%) 2,105,961 67.7% (209,860) (3) 2,315,821 74.5%

Operating expenses

Research and development 370,411 (5,309) (1) 365,102

Sales and marketing 585,044 (9,335) (1) 575,709

General and administrative 237,532 (10,745) (1) 226,787

Amortization of acquired customer-based intangible assets 219,559 (219,559) (2) —

Special charges (recoveries) 100,428 (100,428) (4) —

GAAP-based income from operations / Non-GAAP-based income from operations 503,529 555,236 (5) 1,058,765

Other income (expense), net (11,946) 11,946 (6) —

Provision for (recovery of) income taxes 110,837 16,897 (7) 127,734

GAAP-based net income / Non-GAAP-based net income, attributable to OpenText 234,225 550,285 (8) 784,510

GAAP-based EPS/ Non-GAAP-based EPS-diluted, attributable to OpenText $ 0.86 $ 2.03 (8) $ 2.89

_________________________________________

(1) Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.

(3) GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of total revenue.

See Note 18 "Special Charges (Recoveries)" to our Consolidated Financial Statements for more details.

(5) GAAP-based and Non-GAAP-based income from operations stated in dollars.

Other income (expense) also includes our share of income (losses) from our holdings in investments as a limited partner.

We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments.

We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.

(7) Adjustment relates to differences between the GAAP-based tax provision rate of approximately 32% and a Non-GAAP-based tax rate of approximately 14%;

these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based net income.

Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net.

(8) Reconciliation of GAAP-based net income to Non-GAAP-based net income:

Year Ended June 30, 2020

Per share diluted

GAAP-based net income, attributable to OpenText $ 234,225 $ 0.86

Amortization 425,276 1.56

Share-based compensation 29,532 0.11

Special charges (recoveries) 100,428 0.37

Other (income) expense, net 11,946 0.04

GAAP-based provision for (recovery of) income taxes 110,837 0.41

Non-GAAP-based provision for income taxes (127,734) (0.46)

Non-GAAP-based net income, attributable to OpenText $ 784,510 $ 2.89

Reconciliation of Adjusted EBITDA

Year Ended June 30, 2020

GAAP-based net income, attributable to OpenText $ 234,225

Provision for (recovery of) income taxes 110,837

Interest and other related expense, net 146,378

Amortization of acquired technology-based intangible assets 205,717

Amortization of acquired customer-based intangible assets 219,559

Depreciation 89,458

Share-based compensation 29,532

Special charges (recoveries) 100,428

Other (income) expense, net 11,946

Adjusted EBITDA $ 1,148,080

LIQUIDITY AND CAPITAL RESOURCES

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Cash provided by operating activities

$ 779,205 $ (202,605) $ 981,810 $ 105,690 $ 876,120

Cash used in investing activities

$ (5,651,420) $ (4,680,461) $ (970,959) $ (902,189) $ (68,770)

Cash provided by (used in) financing activities

$ 4,403,053 $ 4,264,597 $ 138,456 $ 1,063,003 $ (924,547)

Cash and cash equivalents

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For more details, see “Long-term Debt and Credit Facilities” below.

As of June 30, 2022, we have recognized a provision of $19.9 million (June 30, 2021—$27.5 million) in respect of both additional foreign taxes or deferred income tax liabilities for temporary differences related to the undistributed earnings of certain non-United States subsidiaries and planned periodic repatriations from certain German subsidiaries, that will be subject to withholding taxes upon distribution.

We have deferred a total of approximately $99.0 million of tax payments under the CARES Act and other COVID-19 related tax relief programs in EMEA since our fourth quarter of Fiscal 2020.

During the year ended June 30, 2022, we made repayments of approximately $16.0 million related to amounts previously deferred.

As of June 30, 2022, we have remaining deferrals of $23.0 million which will become payable throughout Fiscal 2023.

As of June 30, 2023, we have recognized a provision of $28.3 million (June 30, 2022—$15.1 million) in respect of deferred income tax liabilities for temporary differences related to the undistributed earnings of certain non-United States subsidiaries and planned periodic repatriations from certain German subsidiaries, that will be subject to withholding taxes upon distribution.

Cash flows provided by operating activities

Cash flows from operating activities increased by $105.7 million, due to an increase in net income after the impact of non-cash items of $25.9 million and a increase in changes from working capital of $80.0 million.

The increase in operating cash flow from changes in working capital was primarily due to the net impact of the following increases:

(i) $175.4 million relating to income taxes payable, net of receivables;

(ii) $23.3 million relating to net operating lease assets and liabilities;

(iii) $21.0 million relating to accounts receivable;

(iv) $5.4 million relating to other assets;

(v) $1.4 million relating to contract assets.

These increases in operating cash flows were partially offset by the following decreases:

(i) $51.7 million relating to prepaid expenses and other current assets;

(ii) $50.3 million relating to accounts payable and accrued liabilities;

(iii) $44.5 million relating to deferred revenues.

During the fourth quarter of Fiscal 2022 our days sales outstanding (DSO) was 43 days compared to a DSO of 44 days during the fourth quarter of Fiscal 2021, largely a result of improvement in collections efficiency.

The per day impact of our

DSO in the fourth quarter of Fiscal 2022 and Fiscal 2021 on our cash flows was $10.0 million and $9.9 million, respectively.

Cash flows from operating activities decreased by $202.6 million during the year ended June 30, 2023, as compared to the same period in the prior fiscal year due to a decrease in net changes from working capital of $255.8 million, partially offset by an increase in net income after the impact of non-cash items of $53.2 million.

During the fourth quarter of Fiscal 2023 we had a days sales outstanding (DSO) of 41 days, compared to our DSO of 43 days during the fourth quarter of Fiscal 2022.

The per day impact of our DSO in the fourth quarter of Fiscal 2023 and Fiscal 2022 on our cash flows was $16.6 million and $10.0 million, respectively.

In arriving at DSO, we exclude contract assets as these assets do not provide an unconditional right to the related consideration from the customer.

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Our cash flows used in investing activities is primarily on account of acquisitions and additions of property and equipment.

Cash flows used in investing activities increased by $902.2 million, primarily due to consideration paid for acquisitions during Fiscal 2022, which includes cash paid for the acquisitions of Zix of $856.2 million and Bricata of $17.8 million.

Cash flows used in investing activities increased by $4.68 billion during the year ended June 30, 2023, as compared to the same period in the prior fiscal year primarily due to consideration paid for acquisitions during Fiscal 2023, which includes cash paid for the Micro Focus Acquisition of $5.658 billion, as compared to the cash paid during Fiscal 2022 for the acquisition of Zix of $856.2 million and the acquisition of Bricata Inc.

of $17.8 million.

Cash flows provided by (used in) financing activities

Our cash flows from financing activities generally consist of long-term debt financing and amounts received from stock options exercised by our employees.

Our cash flows from financing activities generally consist of long-term debt financing and amounts received from stock options exercised by our employees and Employee Stock Purchase Plan (ESPP) purchases by our employees.

These inflows are typically offset by scheduled and non-scheduled repayments of our long-term debt financing and, when applicable, the payment of dividends and/or repurchases of our Common Shares.

Cash flows provided by financing activities increased by $1.1 billion.

Cash flows provided by financing activities increased by $4.265 billion during the year ended June 30, 2023 as compared to the same period in the prior fiscal year.

This is primarily due to the net impact of the following activities:

(i) $1.5 billion relating to proceeds from the issuance of Senior Notes 2031 and Senior Notes 2029 (both defined below), of which a portion of the net proceeds was used to redeem $850 million of our Senior Notes 2026 (as defined below).

The increases in cash flows provided by financing activities were partially offset by the following decreases:

(i) $250.0 million relating to higher repayments of our long-term debt and Revolver (as defined below), which is inclusive of $850 million redemption of Senior Notes 2026 (as defined below) during our second quarter of Fiscal 2022, partially offset by $600.0 million repaid on amounts previously drawn on our Revolver in the second quarter of Fiscal 2021;

(ii) $177.0 million relating to the repurchase and cancellation of 3,809,559 Common Shares under our share repurchase plans authorized on both November 5, 2020 and November 4, 2021 (as discussed below);

(iii) $25.0 million relating to early call termination premium upon redemption of Senior Notes 2026 and $17.2 million relating to debt issuance costs for the issuance of Senior Notes 2031 and Senior Notes 2029;

(iv) $27.0 million relating to higher cash dividends paid to shareholders;

(v) $12.9 million lower proceeds from the issuance of Common Shares for the exercise of options and the OpenText Employee Stock Purchase Plan (ESPP);

(vi) $46.8 million relating to cash used in the repurchase of Common Shares on the open market for potential reissuance under our Long-Term Incentive Plans (LTIP) or other stock compensation plans;

(vii) $0.4 million relating to a cash distribution to non-controlling interests holder.

(i) $3.427 billion increase in proceeds from the issuance of long-term debt and draw down on the Revolver;

(ii) $657.1 million decrease in repayments of long-term debt and Revolver;

(iii) $266.7 million related to less cash used in the repurchases of Common Shares and treasury stock;

(iv) $25.0 million relating to early call termination premium upon redemption of Senior Notes 2026 in Fiscal 2022 that did not occur in Fiscal 2023.

The increases in cash flows provided by financing activities above were partially offset by the following decreases:

(i) $60.7 million increase in debt issuance costs;

(ii) $27.9 million related to lower proceeds from the issuance of Common Shares for the exercise of options and the OpenText ESPP;

(iii) $21.9 million related to higher cash dividends paid to shareholders.

Cash Dividends

6 unchanged sentences

On November 24, 2021, OpenText Holdings, Inc.

(OTHI), a wholly-owned indirect subsidiary of the Company, issued $650 million in aggregate principal amount of 4.125% Senior Notes due 2031 guaranteed by the Company (Senior Notes 2031) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and to certain non-U.S.

persons in offshore transactions pursuant to Regulation S under the Securities Act.

Senior Notes 2031 bear interest at a rate

of 4.125% per annum, payable semi-annually in arrears on June 1 and December 1, commencing on June 1, 2022.

Senior Notes 2031 bear interest at a rate of 4.125% per annum, payable semi-annually in arrears on June 1 and December 1, commencing on June 1, 2022.

Senior Notes 2031 will mature on December 1, 2031, unless earlier redeemed, in accordance with their terms, or repurchased.

10 unchanged sentences

The 2031 Indenture also provides for events of default, which, if any of them occurs, may permit or, in certain circumstances, require the principal, premium, if any, interest and any other monetary obligations on all the then-outstanding Senior Notes 2031 to be due and payable immediately.

Senior Notes 2031 are guaranteed on a senior unsecured basis by the Company and the Company’s existing and future wholly-owned subsidiaries (other than OTHI) that borrow or guarantee the obligations under our existing senior credit facilities.

Senior Notes 2031 and the guarantees rank equally in right of payment with all of the Company’s, OTHI’s and the guarantors’ existing and future senior unsubordinated debt and will rank senior in right of payment to all of the Company’s, OTHI’s and the guarantors’ future subordinated debt.

1 unchanged sentence

The foregoing description of the 2031 Indenture does not purport to be complete and is qualified in its entirety by reference to the full text of the 2031 Indenture, which is filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on November 24, 2021.

For further details relating to our debt, please see Note 11 “Long-Term Debt” to our Consolidated Financial Statements.

Senior Notes 2030

On February 18, 2020 Open Text Holdings, Inc.

(OTHI), a wholly-owned indirect subsidiary of the Company, issued $900 million in aggregate principal amount of 4.125% Senior Notes due 2030 guaranteed by the Company (Senior Notes 2030) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and to certain non-U.S.

On February 18, 2020 OTHI, a wholly-owned indirect subsidiary of the Company, issued $900 million in aggregate principal amount of 4.125% Senior Notes due 2030 guaranteed by the Company (Senior Notes 2030) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and to certain non-U.S.

persons in offshore transactions pursuant to Regulation S under the Securities Act.

12 unchanged sentences

The 2030 Indenture also provides for events of default, which, if any of them occurs, may permit or, in certain circumstances, require the principal, premium, if any, interest and any other monetary obligations on all the then-outstanding Senior Notes 2030 to be due and payable immediately.

Senior Notes 2030 are guaranteed on a senior unsecured basis by the Company and the Company's existing and future wholly-owned subsidiaries (other than OTHI) that borrow or guarantee the obligations under our existing senior credit facilities.

Senior Notes 2030 are guaranteed on a senior unsecured basis by the Company and the Company’s existing and future wholly-owned subsidiaries (other than OTHI) that borrow or guarantee the obligations under our senior credit facilities.

Senior Notes 2030 and the guarantees rank equally in right of payment with all of the Company, OTHI and the guarantors’ existing and future senior unsubordinated debt and will rank senior in right of payment to all of the Company, OTHI and the guarantors’ future subordinated debt.

Senior Notes 2030 and the guarantees will be effectively subordinated to all of the Company, OTHI and the guarantors’ existing and future secured debt, including the obligations under the senior credit facilities, to the extent of the value of the assets securing such secured debt.

Senior Notes 2030 and the guarantees will be effectively subordinated to all of the Company, OTHI

and the guarantors’ existing and future secured debt, including the obligations under the senior credit facilities, to the extent of the value of the assets securing such secured debt.

The foregoing description of the 2030 Indenture does not purport to be complete and is qualified in its entirety by reference to the full text of the 2030 Indenture, which is filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on February 18, 2020.

For further details relating to our debt, please see Note 11 “Long-Term Debt” to our Consolidated Financial Statements.

Senior Notes 2029

14 unchanged sentences

The 2029 Indenture also provides for events of default, which, if any of them occurs, may permit or, in certain circumstances, require the principal, premium, if any, interest and any other monetary obligations on all the then-outstanding Senior Notes 2029 to be due and payable immediately.

Senior Notes 2029 are guaranteed on a senior unsecured basis by our existing and future wholly-owned subsidiaries that borrow or guarantee the obligations under our existing senior credit facilities.

Senior Notes 2029 are guaranteed on a senior unsecured basis by our existing and future wholly-owned subsidiaries that borrow or guarantee the obligations under our senior credit facilities.

Senior Notes 2029 and the guarantees rank equally in right of payment with all of our and our guarantors’ existing and future senior unsubordinated debt and will rank senior in right of payment to all of our and our guarantors’ future subordinated debt.

1 unchanged sentence

The foregoing description of the 2029 Indenture does not purport to be complete and is qualified in its entirety by reference to the full text of the 2029 Indenture, which is filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on November 24, 2021.

For further details relating to our debt, please see Note 11 “Long-Term Debt” to our Consolidated Financial Statements.

Senior Notes 2028

14 unchanged sentences

The 2028 Indenture also provides for events of default, which, if any of them occurs, may permit or, in certain circumstances, require the principal, premium, if any, interest and any other monetary obligations on all the then-outstanding Senior Notes 2028 to be due and payable immediately.

Senior Notes 2028 are guaranteed on a senior unsecured basis by our existing and future wholly-owned subsidiaries that borrow or guarantee the obligations under our existing senior credit facilities.

Senior Notes 2028 are guaranteed on a senior unsecured basis by our existing and future wholly-owned subsidiaries that borrow or guarantee the obligations under our senior credit facilities.

Senior Notes 2028 and the guarantees rank equally in right of payment with all of our and our guarantors’ existing and future senior unsubordinated debt and will rank senior in right of payment to all of our and our guarantors’ future subordinated debt.

1 unchanged sentence

The foregoing description of the 2028 Indenture does not purport to be complete and is qualified in its entirety by reference to the full text of the 2028 Indenture, which is filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on February 18, 2020.

For further details relating to our debt, please see Note 11 “Long-Term Debt” to our Consolidated Financial Statements.

Senior Notes 2026

On May 31, 2016 we issued $600 million in aggregate principal amount of 5.875% Senior Notes due 2026 (Senior Notes 2026) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and to certain non-U.S.

persons in offshore transactions pursuant to Regulation S under the Securities Act.

Senior Notes 2026 had interest at a rate of 5.875% per annum, payable semi-annually in arrears on June 1 and December 1, commencing on December 1, 2016.

1 unchanged sentence

On December 20, 2016, we issued an additional $250 million in aggregate principal amount by reopening our Senior Notes 2026 at an issue price of 102.75%.

The additional notes have identical terms, are fungible with and are a part of a single series with the previously issued $600 million aggregate principal amount of Senior Notes 2026.

The additional notes had identical terms, were fungible with and were a part of a single series with the previously issued $600 million aggregate principal amount of Senior Notes 2026.

The outstanding aggregate principal amount of Senior Notes 2026, after taking into consideration the additional issuance, was $850 million as of December 9, 2021.

On December 9, 2021, we redeemed Senior Notes 2026 in full at a price equal to 102.9375% of the principal amount plus accrued and unpaid interest to, but excluding, the redemption date.

A portion of the net proceeds from the offerings of Senior

Notes 2029 and Senior Notes 2031 was used to redeem Senior Notes 2026.

A portion of the net proceeds from the offerings of Senior Notes 2029 and Senior Notes 2031 was used to redeem Senior Notes 2026.

Upon redemption, Senior Notes 2026 were cancelled, and any obligation thereunder was extinguished.

The resulting loss of $27.4 million, consisting of $25.0 million relating to the early termination call premium, $6.2 million relating to unamortized debt issuance costs and ($3.8) million relating to unamortized premium, has been recorded as a component of Other income (expense), net in our Consolidated Statements of Income.

The resulting loss of $27.4 million, consisting of $25.0 million

relating to the early termination call premium, $6.2 million relating to unamortized debt issuance costs and $(3.8) million relating to unamortized premium, has been recorded as a component of Other income (expense), net in our Consolidated Statements of Income.

See Note 23 “Other Income (Expense), Net” to our Consolidated Financial Statements.

For further details relating to our debt, please see Note 11 “Long-Term Debt” to our Consolidated Financial Statements.

Senior Secured Fixed Rate Notes

Senior Secured Notes 2027

On December 1, 2022, we issued $1 billion in aggregate principal amount of Senior Secured Notes 2027 in connection with the financing of the Micro Focus Acquisition in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to certain non-U.S.

persons in offshore transactions pursuant to Regulation S under the Securities Act.

Senior Secured Notes 2027 bear interest at a rate of 6.90% per annum, payable semi-annually in arrears on June 1 and December 1, commencing on June 1, 2023.

Senior Secured Notes 2027 will mature on December 1, 2027, unless earlier redeemed, in accordance with their terms, or repurchased.

We may redeem all or a portion of the Senior Secured Notes 2027 at any time prior to November 1, 2027 at a redemption price equal to the greater of (a) 100% of the principal amount of the Senior Secured Notes 2027 to be redeemed and (b) the net present value of the remaining scheduled payments of principal and interest thereon discounted to the Par Call Date less interest accrued to the date of redemption, plus accrued and unpaid interest to, but excluding, the redemption date.

On or after the Par Call Date (as defined in the 2027 Indenture), the Company may redeem the Senior Secured Notes 2027, in whole or in part, at any time and from time to time, at a redemption price equal to 100% of the principal amount of the Senior Secured Notes 2027 being redeemed plus accrued and unpaid interest thereon to the redemption date.

If we experience one of the kinds of change of control triggering events specified in the indenture governing the Senior Secured Notes 2027 dated as of December 1, 2022, among the Company, the subsidiary guarantors party thereto, The Bank of New York Mellon, as U.S.

trustee, and BNY Trust Company of Canada, as Canadian trustee (the 2027 Indenture), we will be required to make an offer to repurchase the Senior Secured Notes 2027 at a price equal to 101% of the principal amount of the Senior Secured Notes 2027, plus accrued and unpaid interest, if any, to the date of purchase.

The 2027 Indenture contains covenants that limit our and certain of the Company’s subsidiaries’ ability to, among other things:

(i) create certain liens and enter into sale and lease-back transactions;

(ii) create, assume, incur or guarantee additional indebtedness of the Company or certain of the Company’s subsidiaries without such subsidiary becoming a subsidiary guarantor of the Senior Secured Notes 2027;

and (iii) consolidate, amalgamate or merge with, or convey, transfer, lease or otherwise dispose of the Company’s property and assets substantially as an entirety to, another person.

These covenants are subject to a number of important limitations and exceptions as set forth in the 2027 Indenture.

The 2027 Indenture also provides for certain events of default, which, if any of them occurs, may permit or, in certain circumstances, require the principal, premium, if any, interest and any other monetary obligations on all the then-outstanding Senior Secured Notes 2027 to be due and payable immediately.

The Senior Secured Notes 2027 are guaranteed on a senior secured basis by certain of the Company’s subsidiaries and are secured with the same priority as the Company’s senior credit facilities.

The Senior Secured Notes 2027 and the related guarantees are effectively senior to all of the Company’s and the guarantors’ senior unsecured debt to the extent of the value of the Collateral (as defined in the 2027 Indenture) and are structurally subordinated to all existing and future liabilities of each of the Company’s existing and future subsidiaries that do not guarantee the Senior Secured Notes 2027.

The foregoing description of the 2027 Indenture does not purport to be complete and is qualified in its entirety by reference to the full text of the 2027 Indenture, which is filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on December 1, 2022.

For further details relating to our debt, please see Note 11 “Long-Term Debt” to our Consolidated Financial Statements.

On May 30, 2018, we entered into a credit facility, which provides for a $1 billion term loan facility with certain lenders named therein, Barclays Bank PLC (Barclays), as sole administrative agent and collateral agent, and as lead arranger and joint bookrunner (Term Loan B) and borrowed the full amount on May 30, 2018 to, among other things, repay in full the loans under our prior $800 million term loan credit facility originally entered into on January 16, 2014.

Repayments made under Term Loan B are equal to 0.25% of the principal amount in equal quarterly installments for the life of Term Loan B, with the remainder due at maturity.

Borrowings under Term Loan B are secured by a first charge over substantially all of our assets on a pari passu basis with the Revolver.

Term Loan B has a seven-year term, maturing in May 2025.

Borrowings under Term Loan B bear interest at a rate per annum equal to an applicable margin plus, at the borrower’s option, either (1) the Eurodollar rate for the interest period relevant to such borrowing or (2) an ABR rate.

The applicable margin for borrowings under Term Loan B is 1.75%, with respect to LIBOR advances and 0.75%, with respect to ABR advances.

The interest on the current outstanding balance for Term Loan B is equal to 1.75% plus LIBOR (subject to a 0.00% floor).

Borrowings under Term Loan B are secured by a first charge over substantially all of our assets on a pari passu basis with the Revolver, the Acquisition Term Loan and Senior Secured Notes 2027.

Term Loan B has a seven-year term, maturing in

On June 6, 2023, we amended the Term Loan B to replace the LIBOR benchmark rate applicable to borrowings under Term Loan B with a SOFR benchmark rate.

Borrowings under Term Loan B bear interest at a rate per annum equal to an applicable margin plus, at the borrower’s option, either (1) the SOFR benchmark rate for the interest period relevant to such borrowing or (2) an alternate base rate (ABR).

The applicable margin for borrowings under Term Loan B is 1.75%, with respect to SOFR advances and 0.75%, with respect to ABR advances.

The interest on the current outstanding balance for Term Loan B is equal to 1.75% plus SOFR (subject to a 0.00% floor).

As of June 30, 2023, the outstanding balance on the Term Loan B bears an interest rate of 6.90%.

For more information regarding the impact and discontinuance of LIBOR, see “Stress in the global financial system may adversely affect our finances and operations in ways that may be hard to predict or to defend against” included within Part I, Item 1A, “Risk Factors” of this Annual Report on Form 10-K.

Term Loan B has incremental facility capacity of (i) $250 million plus (ii) additional amounts, subject to meeting a “consolidated senior secured net leverage” ratio not exceeding 2.75:1.00, in each case subject to certain conditions.

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Consolidated net leverage ratio is defined for this purpose as the proportion of our total debt reduced by unrestricted cash, including guarantees and letters of credit, over our trailing twelve months net income before interest, taxes, depreciation, amortization, restructuring, share-based compensation and other miscellaneous charges.

As of June 30, 2022, our consolidated net leverage ratio was 2.0:1.

As of June 30, 2023, our consolidated net leverage ratio, as calculated in accordance with the applicable agreement, was 3.49:1.00.

For further details relating to our debt, please see Note 11 “Long-Term Debt” to our Consolidated Financial Statements.

On October 31, 2019, we amended our committed revolving credit facility (the Revolver) to increase the total commitments under the Revolver from $450 million to $750 million as well as to extend the maturity from May 5, 2022 to October 31, 2024.

Borrowings under the Revolver are secured by a first charge over substantially all of our assets, on a pari passu basis with Term Loan B.

Borrowings under the Revolver are secured by a first charge over substantially all of our assets, on a pari passu basis with Term Loan B, the Acquisition Term Loan and Senior Secured Notes 2027.

The Revolver has no fixed repayment date prior to the end of the term.

Borrowings under the Revolver bear interest per annum at a floating rate of LIBOR plus a fixed margin dependent on our consolidated net leverage ratio ranging from 1.25% to 1.75%.

On June 6, 2023, we amended the Revolver to replace the LIBOR benchmark rate applicable to borrowings with a SOFR benchmark rate.

Borrowings under the Revolver currently bear interest per annum at a floating rate of interest equal to Term SOFR plus the SOFR Adjustment (as defined in the Revolver) and a fixed margin dependent on our consolidated net leverage ratio ranging from 1.25% to 1.75%.

Under the Revolver, we must maintain a “consolidated net leverage” ratio of no more than 4.00:1.00 at the end of each financial quarter.

As of June 30, 2022, we had no outstanding balance under the Revolver (June 30, 2021—nil).

As of June 30, 2023, we had $275 million outstanding balance under the Revolver (June 30, 2022—nil).

For the year ended June 30, 2023, we recorded interest expense of $10.1 million relating to the Revolver (June 30, 2022—nil).

In July 2023, the Company subsequently repaid $175 million drawn under the Revolver.

For further details relating to our debt, please see Note 11 “Long-Term Debt” to our Consolidated Financial Statements.

Acquisition Term Loan

On December 1, 2022, we amended our first lien term loan facility (the Acquisition Term Loan), dated as of August 25, 2022, to increase the aggregate commitments under the senior secured delayed-draw term loan facility from an aggregate principal amount of $2.585 billion to an aggregate principal amount of $3.585 billion.

During the third quarter of Fiscal 2023, the Company drew down $3.585 billion, net of original issuance discount of 3% and other fees, of which the net proceeds were used to fund the Micro Focus Acquisition (see Note 19 “Acquisitions” to our Consolidated Financial Statements for more details).

The Acquisition Term Loan has a seven-year term from the date of funding, and repayments under the Acquisition Term Loan are equal to 0.25% of the principal amount in equal quarterly installments for the life of the Acquisition Term Loan, with the remainder due at maturity.

Borrowings under the Acquisition Term Loan currently bear a floating rate of interest equal to Term SOFR plus the SOFR Adjustment (as defined in the Acquisition Term Loan) and applicable margin of 3.50%.

As of June 30, 2023, the outstanding balance on the Acquisition Term Loan bears an interest rate of 8.75%.

As of June 30, 2023, the Acquisition Term Loan bears an effective interest rate of 9.85%.

The effective interest rate includes interest expense of $125.7 million and amortization of debt discount and issuance costs of $9.3 million.

The Acquisition Term Loan has incremental facility capacity of (i) $250 million plus (ii) additional amounts, subject to meeting a “consolidated senior secured net leverage” ratio not exceeding 2.75:1.00, in each case subject to certain conditions.

Consolidated senior secured net leverage ratio is defined for this purpose as the proportion of the Company’s total debt reduced by unrestricted cash, including guarantees and letters of credit, that is secured by the Company’s or any of the Company’s subsidiaries’ assets, over the Company’s trailing four financial quarter net income before interest, taxes, depreciation, amortization, restructuring, share-based compensation and other miscellaneous charges.

Under the Acquisition Term Loan, we must maintain a “consolidated net leverage” ratio of no more than 4.50:1.00 at the end of each financial quarter.

Consolidated net leverage ratio is defined for this purpose as the proportion of the Company’s total debt reduced by unrestricted cash, including guarantees and letters of credit, over the Company’s trailing four financial quarter net income before interest, taxes, depreciation, amortization, restructuring, share-based compensation and other miscellaneous charges as defined in the Acquisition Term Loan.

As of June 30, 2023, our consolidated net leverage ratio, as calculated in accordance with the applicable agreement, was 3.49:1.

The Acquisition Term Loan is unconditionally guaranteed by certain subsidiary guarantors, as defined in the Acquisition Term Loan, and is secured by a first charge on substantially all of the assets of the Company and the subsidiary guarantors on a pari passu basis with the Revolver, Term Loan B and the Senior Secured Notes 2027.

For the year ended June 30, 2023, we recorded interest expense of $125.7 million, relating to the Acquisition Term Loan (year ended June 30, 2022— nil).

The foregoing description of the Acquisition Term Loan does not purport to be complete and is qualified in its entirety by reference to the full text of the Acquisition Term Loan, which is filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on August 25, 2022.

For further details relating to our debt, please see Note 11 “Long-Term Debt” to our Consolidated Financial Statements.

On August 25, 2022, we entered into a bridge loan agreement (Bridge Loan) which provided for commitments of up to $2.0 billion to finance a portion of the repayment of Micro Focus’ existing debt.

On December 1, 2022, we entered into an amendment to the Bridge Loan that reallocated commitments under the Bridge Loan to the Acquisition Term Loan.

In connection with the amendment to the Bridge Loan and the receipt of proceeds from the issuance of the Senior Secured Notes 2027, all remaining commitments under the Bridge Loan were reduced to zero and the Bridge Loan was terminated, which resulted in a loss on debt extinguishment of $8.2 million relating to unamortized debt issuance costs (see Note 22 “Other Income (Expense), Net” to our Consolidated Financial Statements for more details).

As of June 30, 2023, we had no borrowings under the Bridge Loan.

For the year ended June 30, 2023, we did not record any interest expense relating to the Bridge Loan.

The foregoing description of the Bridge Loan does not purport to be complete and is qualified in its entirety by reference to the full text of the Bridge Loan, which is filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on August 25, 2022.

For further details relating to our debt, please see Note 11 “Long-Term Debt” to our Consolidated Financial Statements.

Shelf Registration Statement

On December 6, 2021, we filed a universal shelf registration statement on Form S-3 with the SEC, which became effective automatically (the Shelf Registration Statement).

The Shelf Registration Statement allows for primary and secondary

offerings from time to time of equity, debt and other securities, including Common Shares, Preference Shares, debt securities, depositary shares, warrants, purchase contracts, units and subscription receipts.

The Shelf Registration Statement allows for primary and secondary offerings from time to time of equity, debt and other securities, including Common Shares, Preference Shares, debt securities, depositary shares, warrants, purchase contracts, units and subscription receipts.

A short-form base shelf prospectus qualifying the distribution of such securities was concurrently filed with Canadian securities regulators on December 6, 2021.

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Share Repurchase Plan / Normal Course Issuer Bid

On November 5, 2020, the Board authorized the Fiscal 2021 Repurchase Plan, pursuant to which we were authorized to purchase in open market transactions, from time to time over the 12 month period commencing November 12, 2020, up to an aggregate of $350 million of our Common Shares on the NASDAQ Global Select Market, the TSX and/or other exchanges and alternative trading systems in Canada and/or the United States, if eligible, subject to applicable law and stock exchange rules.

On November 5, 2020, the Board authorized a share repurchase plan (the Fiscal 2021 Repurchase Plan), pursuant to which we were authorized to purchase in open market transactions, from time to time over the 12 month period commencing November 12, 2020, up to an aggregate of $350 million of our Common Shares on the NASDAQ Global Select Market, the TSX and/or other exchanges and alternative trading systems in Canada and/or the United States, if eligible, subject to applicable law and stock exchange rules.

The price that we were authorized to pay for Common Shares in open market transactions was the market price at the time of purchase or such other price as was permitted by applicable law or stock exchange rules.

The Fiscal 2021 Repurchase Plan was effected in accordance with Rule 10b-18 under the Exchange Act (Rule 10b-18).

The Fiscal 2021 Repurchase Plan was effected in accordance with Rule 10b-18.

Purchases made under the Fiscal 2021 Repurchase Plan were subject to a limit of 13,618,774 shares (representing 5% of the Company’s issued and outstanding Common Shares as of November 4, 2020).

All Common Shares purchased by us pursuant to the Fiscal 2021 Repurchase Plan were cancelled.

On November 4, 2021, the Board authorized the Fiscal 2022 Repurchase Plan, pursuant to which we may purchase in open market transactions, from time to time over the 12 month period commencing November 12, 2021, up to an aggregate of $350 million of our Common Shares on the NASDAQ Global Select Market, the Toronto Stock Exchange (as part of a Fiscal 2022 NCIB) and/or other exchanges and alternative trading systems in Canada and/or the United States, if eligible, subject to applicable law and stock exchange rules.

The price that we have paid and will pay for Common Shares in open market transactions has been and will be the market price at the time of purchase or such other price as may be permitted by applicable law or stock exchange rules.

The Fiscal 2022 Repurchase Plan has been and will be effected in accordance with Rule 10b-18.

Purchases made under the Fiscal 2022 Repurchase Plan are subject to a limit of 13,638,008 shares (representing 5% of the Company’s issued and outstanding Common Shares as of October 31, 2021).

All Common Shares purchased by us pursuant to the Fiscal 2022 Repurchase Plan have been and will be cancelled.

During the year ended June 30, 2022, we repurchased and cancelled 3,809,559 Common Shares for $177.0 million (year ended June 30, 2021 and 2020— 2,500,000 and nil Common Shares for $119.1 million and nil, respectively).

Share repurchases during the year ended June 30, 2022 were completed under our share repurchase plans authorized on both November 5, 2020 and November 4, 2021.

On November 4, 2021, the Board authorized a share repurchase plan (the Fiscal 2022 Repurchase Plan), pursuant to which we were authorized to purchase in open market transactions, from time to time over the 12 month period commencing November 12, 2021, up to an aggregate of $350 million of our Common Shares on the NASDAQ Global Select Market, the TSX (as part of a Fiscal 2022 Normal Course Issuer Bid (NCIB)) and/or other exchanges and alternative trading systems in Canada and/or the United States, if eligible, subject to applicable law and stock exchange rules.

The price that we paid for Common Shares in open market transactions was the market price at the time of purchase or such other price as was permitted by applicable law or stock exchange rules.

The Fiscal 2022 Repurchase Plan was effected in accordance with Rule 10b-18.

All Common Shares purchased by us pursuant to the Fiscal 2022 Repurchase Plan were cancelled.

During the year ended June 30, 2023, we did not repurchase and cancel any Common Shares (year ended June 30, 2022 and 2021— 3,809,559 and 2,500,000 Common Shares for $177.0 million and $119.1 million, respectively).

Normal Course Issuer Bid

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Under the rules of the TSX, the maximum number of Common Shares that could be purchased in this period was 13,618,774 (representing 5% of the Company’s issued and outstanding Common Shares as of November 4, 2020), and the maximum number of Common Shares that could be purchased on a single day was 143,424 Common Shares, which was 25% of 573,699 (the average daily trading volume for the Common Shares on the TSX for the six months ended October 31, 2020), subject to certain exceptions for block purchases, subject in any case to the volume and other limitations under Rule 10b-18.

The Company renewed the Fiscal 2022 NCIB in order to provide it with a means to execute purchases over the TSX as part of the overall Fiscal 2022 Repurchase Plan.

The TSX approved the Company's notice of intention to commence the Fiscal 2022 NCIB pursuant to which the Company may purchase Common Shares over the TSX for the period commencing November 12, 2021 until November 11, 2022 in accordance with the TSX's normal course issuer bid rules, including that such purchases are to be made at prevailing market prices or as otherwise permitted.

Under the rules of the TSX, the maximum number of Common Shares that may be purchased in this period is 13,638,008 (representing 5% of the Company’s issued and outstanding Common Shares as of October 31, 2021), and the maximum number of Common Shares that may be purchased on a single day is 112,590 Common Shares, which is 25% of 450,361 (the average daily trading volume for the Common Shares on the TSX for the six months ended October 31,

2021), subject to certain exceptions for block purchases, subject in any case to the volume and other limitations under Rule 10b-18.

The Company renewed the NCIB in Fiscal 2022 in order to provide it with a means to execute purchases over the TSX as part of the overall Fiscal 2022 Repurchase Plan.

The TSX approved the Company’s notice of intention to commence the Fiscal 2022 NCIB pursuant to which the Company was authorized to purchase Common Shares over the TSX for the period commencing November 12, 2021 until November 11, 2022 in accordance with the TSX’s normal course issuer bid rules, including that such purchases were to be made at prevailing market prices or as otherwise permitted.

Under the rules of the TSX, the maximum number of Common Shares that could be purchased in this period was 13,638,008 (representing 5% of the Company’s issued and outstanding Common Shares as of October 31, 2021), and the maximum number of Common Shares that could be purchased on a single day was 112,590 Common Shares, which is 25% of 450,361 (the average daily trading volume for the Common Shares on the TSX for the six months ended October 31, 2021), subject to certain exceptions for block purchases, subject in any case to the volume and other limitations under Rule 10b-18.

As of June 30, 2023, our total unfunded pension plan obligations were $130.82 million, of which $4.50 million is payable within the next twelve months.

We expect to be able to make the long-term and short-term payments related to these obligations in the normal course of operations.

Our anticipated payments under our most significant plans, Open Text Document Technologies GmbH (CDT), GXS GmbH (GXS GER), GXS Philippines, Inc.

(GXS PHP), for the fiscal years indicated below are as follows:

Anticipated pension payments under our defined benefit plans for the fiscal years indicated below are as follows:

Fiscal years ending June 30,

CDT GXS GER GXS PHP

2024 $ 13,115

2024 942 937 122

2025 990 926 170

2026 1,030 920 179

2027 1,078 911 544

2029 to 2033 102,196

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Payments due between

Total July 1, 2022 -

June 30, 2023 July 1, 2023 -

June 30, 2025 July 1, 2025 -

June 30, 2027 July 1, 2027

Total July 1, 2023 - June 30, 2024 July 1, 2024 - June 30, 2026 July 1, 2026 - June 30, 2028 July 1, 2028 and beyond

Long-term debt obligations (1)

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411,394 105,685 144,062 90,267 71,380

Finance lease obligations (3)

11,482 5,712 5,311 459 —

Purchase obligations for contracts not accounted for as lease obligations 176,440 52,588 108,346 15,506 —

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Please see Note 6 “Leases” to our Consolidated Financial Statements for more details.

(3) Represents the undiscounted future minimum lease payments under our financing leases liabilities and excludes sublease income expected to be received under our various sublease agreements with third parties.

Please see Note 6 “Leases” to our Consolidated Financial Statements for more details.

Guarantees and Indemnifications

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Contingencies

As part of its ongoing audit of our Canadian tax returns, the Canada Revenue Agency (CRA) has disputed our transfer pricing methodology used for certain intercompany transactions with our international subsidiaries and has issued notices of reassessment for Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016.

As part of its ongoing audit of our Canadian tax returns, the CRA has disputed our transfer pricing methodology used for certain intercompany transactions with our international subsidiaries and has issued notices of reassessment for Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016.

Assuming the utilization of available tax attributes (further described below), we estimate our potential aggregate liability, as of June 30, 2023, in connection with the CRA’s reassessments for Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016, to be limited to penalties, interest and provincial taxes that may be due of approximately $76 million.

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We strongly disagree with the CRA’s positions and believe the reassessments of Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016 (including any penalties) are without merit, and we are continuing to contest these reassessments.

On June 30, 2022, we filed a notice of appeal with the Tax Court of Canada seeking to reverse all such reassessments (including any penalties) in full.

On June 30, 2022, we filed a notice of appeal with the Tax Court of Canada seeking to reverse all such reassessments (including penalties) in full and the customary court process is ongoing.

Even if we are unsuccessful in challenging the CRA’s reassessments to increase our taxable income for Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016, we have elective deductions available for those years (including carry-backs from later years) that would offset such increased amounts so that no additional cash tax would be payable, exclusive of any assessed penalties and interest, as described above.

The CRA has also audited Fiscal 2017 on a basis that we strongly disagree with and are contesting.

The CRA has audited Fiscal 2017 and Fiscal 2018 on a basis that we strongly disagree with and are contesting.

The focus of the CRA audit has been the valuation of certain intellectual property and goodwill when one of our subsidiaries continued into Canada from Luxembourg in July 2016.

In accordance with applicable rules, these assets were recognized for tax purposes at fair market value as of that time, which value was supported by an expert valuation prepared by an independent leading accounting and advisory firm.

In conjunction with the Fiscal 2017 audit, the CRA issued a proposal letter dated April 7, 2021 (Proposal Letter) indicating to us that it proposes to reassess our Fiscal 2017 tax year to reduce the depreciable basis of these assets.

We have made extensive submissions in support of our position.

CRA’s position for Fiscal 2017 relies in significant part on the application of its positions regarding our transfer pricing methodology that are the basis for its reassessment of our fiscal years 2012 to 2016 described above, and that we believe are without merit.

Other aspects of CRA’s position for Fiscal 2017 conflict with the expert valuation prepared by the independent leading accounting and advisory firm that was used to support our original filing position.

On January 27, 2022, the CRA issued a notice of reassessment in respect of Fiscal 2017 on the basis of its position set forth in the Proposal Letter.

On April 19, 2022, we filed our notice of objection regarding the reassessment in respect of Fiscal 2017.

CRA’s position for Fiscal 2017 and Fiscal 2018 relies in significant part on the application of its positions regarding our transfer pricing methodology that are the basis for its reassessment of our fiscal years 2012 to 2016 described above, and that we believe are without merit.

Other aspects of CRA’s position for Fiscal 2017 and Fiscal 2018 conflict with the expert valuation prepared by the independent leading accounting and advisory firm that was used to support our original filing position.

The CRA issued notices of reassessment in respect of Fiscal 2017 and Fiscal 2018 on a basis consistent with its proposal to reduce the available depreciable basis of these assets in Canada.

On April 19, 2022, we filed our notice of objection regarding the reassessment in respect of Fiscal 2017 and on March 15, 2023, we filed our notice of objection regarding the reassessment in respect of Fiscal 2018.

If we are ultimately unsuccessful in defending our position, the estimated impact of the proposed adjustment could result in us recording an income tax expense, with no immediate cash payment, to reduce the stated value of our deferred tax assets of up to approximately $470 million.

Any such income tax expense could also have a corresponding

cash tax impact that would primarily occur over a period of several future years based upon annual income realization in Canada.

We strongly disagree with the CRA’s position for Fiscal 2017 and intend to vigorously defend our original filing position, We are not required to provisionally pay any cash amounts to the CRA as a result of the reassessment in respect of Fiscal 2017 due to the utilization of available tax attributes;

Any such income tax expense could also have a corresponding cash tax impact that would primarily occur over a period of several future years based upon annual

income realization in Canada.

We strongly disagree with the CRA’s position for Fiscal 2017 and Fiscal 2018 and intend to vigorously defend our original filing position.

We are not required to provisionally pay any cash amounts to the CRA as a result of the reassessment in respect of Fiscal 2017 and Fiscal 2018 due to the utilization of available tax attributes;

however, to the extent the CRA reassesses subsequent fiscal years on a similar basis, we expect to make certain minimum payments required under Canadian legislation, which may need to be provisionally made starting in Fiscal 2024 while the matter is in dispute.

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Accordingly, as of the date of this Annual Report on Form 10-K, we have not recorded any accruals in respect of these reassessments or proposed reassessment in our Consolidated Financial Statements.

The CRA is currently in preliminary stages of auditing Fiscal 2018 and Fiscal 2019.

The CRA is auditing Fiscal 2019, and may reassess Fiscal 2019 on a similar basis as Fiscal 2017 and Fiscal 2018.

The CRA is also in preliminary stages of auditing Fiscal 2020.

Carbonite Class Action Complaint

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Ali, and Anthony Folger (No.

1:19-cv-11662-LTS).

1:19-cv-11662-LTS) (the Luna Complaint).

The complaint alleges violations of the federal securities laws under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder.

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The defendants moved to dismiss the Securities Actions on March 10, 2020.

The motion was fully briefed in June 2020 and a hearing on the motion to dismiss the Securities Actions was held on October 15, 2020.

Following the hearing, on October 22, 2020, the district court granted with prejudice the defendants’ motion to dismiss the Securities Actions.

On November 20, 2020, the lead plaintiff filed a notice of appeal to the Court of Appeals for the First Circuit.

On December 21, 2021, the First Circuit issued a decision reversing and remanding the Securities Actions to the district court for further proceedings.

On October 22, 2020, the district court granted with prejudice the defendants’ motion to dismiss the Securities Actions.

On November 20, 2020, the lead plaintiff filed a notice of appeal to the United States Court of Appeals for the First Circuit.

On December 21, 2021, the United States Court of Appeals for the First Circuit issued a decision reversing and remanding the Securities Actions to the district court for further proceedings.

The parties have completed discovery and defendants have filed a motion for summary judgment.

The defendants remain confident in their position, believe the Securities Actions are without merit, and will continue to vigorously defend the matter.

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On February 27, 2017, before our acquisition of Carbonite, a non-practicing entity named Realtime Data LLC (Realtime Data) filed a lawsuit against Carbonite in the U.S.

District Court for the Eastern District of Texas “Realtime Data LLC v.

District Court for the Eastern District of Texas captioned Realtime Data LLC v.

Carbonite, Inc.

et al (No 6:17-cv-00121-RWS-JDL).” Therein, it alleged that certain of Carbonite’s cloud storage services infringe upon certain patents held by Realtime Data.

et al (No 6:17-cv-00121-RWS-JDL).

Therein, it alleged that certain of Carbonite’s cloud storage services infringe upon certain patents held by Realtime Data.

Realtime Data’s complaint against Carbonite sought damages in an unspecified amount and injunctive relief.

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District Court for the District of Massachusetts has issued a claim construction order.

We anticipate motion practice based upon the result of that order.

We have not accrued a loss contingency related to this matter because litigation related to a non-practicing entity is inherently unpredictable.

Although a loss is reasonably possible, an unfavorable outcome is not considered by management to be probable at this time and we remain unable to reasonably estimate a possible loss or range of loss associated with this litigation.

Please also see Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for Fiscal 2022.

Other Matters

Please also see Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K for Fiscal 2023, as well as Note 15 “Income Taxes” to the Consolidated Financial Statements included in this Annual Report on Form 10-K related to certain historical matters arising prior to the Micro Focus Acquisition.

Off-Balance Sheet Arrangements

We do not enter into off-balance sheet financing as a matter of practice, except for guarantees relating to taxes and letters of credit on behalf of parties with whom we conduct business.

Use of Non-GAAP Financial Measures

In addition to reporting financial results in accordance with U.S.

GAAP, the Company provides certain financial measures that are not in accordance with U.S.

GAAP (Non-GAAP).

These Non-GAAP financial measures have certain limitations in that they do not have a standardized meaning and thus the Company’s definition may be different from similar Non-GAAP financial measures used by other companies and/or analysts and may differ from period to period.

Thus, it may be more difficult to compare the Company’s financial performance to that of other companies.

However, the Company’s management compensates for these limitations by providing the relevant disclosure of the items excluded in the calculation of these Non-GAAP financial measures both in its reconciliation to the U.S.

GAAP financial measures and its Consolidated Financial Statements, all of which should be considered when evaluating the Company’s results.

The Company uses these Non-GAAP financial measures to supplement the information provided in its Consolidated Financial Statements, which are presented in accordance with U.S.

The presentation of Non-GAAP financial measures is not meant to be a substitute for financial measures presented in accordance with U.S.

GAAP, but rather should be evaluated in conjunction with and as a supplement to such U.S.

GAAP measures.

OpenText strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure.

The Company therefore believes that despite these limitations, it is appropriate to supplement the disclosure of the U.S.

GAAP measures with certain Non-GAAP measures defined below.

Non-GAAP-based net income and Non-GAAP-based EPS, attributable to OpenText, are consistently calculated as GAAP-based net income or earnings (loss) per share, attributable to OpenText, on a diluted basis, excluding the effects of the amortization of acquired intangible assets, other income (expense), share-based compensation, and special charges (recoveries), all net of tax and any tax benefits/expense items unrelated to current period income, as further described in the tables below.

Non-GAAP-based gross profit is the arithmetical sum of GAAP-based gross profit and the amortization of acquired technology-based intangible assets and share-based compensation within cost of sales.

Non-GAAP-based gross margin is calculated as Non-GAAP-based gross profit expressed as a percentage of total revenue.

Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) is consistently calculated as GAAP-based net income, attributable to OpenText, excluding interest income (expense), provision for (recovery of) income taxes, depreciation and amortization of acquired intangible assets, other income (expense), share-based compensation and special charges (recoveries).

The Company’s management believes that the presentation of the above defined Non-GAAP financial measures provides useful information to investors because they portray the financial results of the Company before the impact of certain non-operational charges.

The use of the term “non-operational charge” is defined for this purpose as an expense that does not impact the ongoing operating decisions taken by the Company’s management.

These items are excluded based upon the way the Company’s management evaluates the performance of the Company’s business for use in the Company’s internal reports and are not excluded in the sense that they may be used under U.S.

Therefore, the Company believes that the exclusion of these special charges (recoveries) will also better aid readers of financial statements in the understanding and comparability of the Company’s operating results and underlying operational trends.

In summary, the Company believes the provision of supplemental Non-GAAP measures allow investors to evaluate the operational and financial performance of the Company’s core business using the same evaluation measures that management uses, and is therefore a useful indication of OpenText’s performance or expected performance of future operations and facilitates period-to-period comparison of operating performance (although prior performance is not necessarily indicative of future performance).

As a result, the Company considers it appropriate and reasonable to provide, in addition to U.S.

GAAP measures, supplementary Non-GAAP financial measures that exclude certain items from the presentation of its financial results.

The following charts provide unaudited reconciliations of U.S.

GAAP-based financial measures to Non-GAAP-based financial measures for the following periods presented.

The Micro Focus Acquisition significantly impacts period-over-period comparability.

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures

for the year ended June 30, 2023

(In thousands, except for per share data)

Year Ended June 30, 2023

GAAP-based Measures GAAP-based Measures

% of Total Revenue Adjustments Note Non-GAAP-based Measures Non-GAAP-based Measures

% of Total Revenue

Cost of revenues

Cloud services and subscriptions $ 590,165 $ (10,664) (1) $ 579,501

Customer support 209,705 (3,627) (1) 206,078

Professional service and other 276,888 (6,998) (1) 269,890

Amortization of acquired technology-based intangible assets 223,184 (223,184) (2) —

GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%) 3,168,393 70.6% 244,473 (3) 3,412,866 76.1%

Operating expenses

Research and development 680,587 (39,065) (1) 641,522

Sales and marketing 948,598 (41,710) (1) 906,888

General and administrative 419,590 (28,238) (1) 391,352

Amortization of acquired customer-based intangible assets 326,406 (326,406) (2) —

Special charges (recoveries) 169,159 (169,159) (4) —

GAAP-based income from operations / Non-GAAP-based income from operations

516,292 849,051 (5) 1,365,343

Other income (expense), net 34,469 (34,469) (6) —

Provision for income taxes

70,767 74,261 (7) 145,028

GAAP-based net income / Non-GAAP-based net income, attributable to OpenText

150,379 740,321 (8) 890,700

GAAP-based EPS / Non-GAAP-based EPS-diluted, attributable to OpenText $ 0.56 $ 2.73 (8) $ 3.29

__________________________

(1) Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.

(3) GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of total revenue.

See Note 18 “Special Charges (Recoveries)” to our Consolidated Financial Statements for more details.

(5) GAAP-based and Non-GAAP-based income from operations stated in dollars.

Other income (expense) also includes our share of income (losses) from our holdings in investments as a limited partner.

We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments.

We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.

Other income (expense) also includes unrealized and realized gains (losses) on our derivatives which are not designated as hedges.

We exclude gains and losses on these derivatives as we do not believe they are reflective of our ongoing business and operating results.

(7) Adjustment relates to differences between the GAAP-based tax provision rate of approximately 32% and a Non-GAAP-based tax rate of approximately 14%;

these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based net income.

Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net.

(8) Reconciliation of GAAP-based net income to Non-GAAP-based net income:

Year Ended June 30, 2023

Per share diluted

GAAP-based net income, attributable to OpenText

$ 150,379 $ 0.56

Amortization 549,590 2.03

Share-based compensation 130,302 0.48

Special charges (recoveries) 169,159 0.63

Other (income) expense, net (34,469) (0.13)

GAAP-based provision for income taxes

Non-GAAP-based recovery of income taxes

(145,028) (0.54)

Non-GAAP-based net income, attributable to OpenText

$ 890,700 $ 3.29

Reconciliation of Adjusted EBITDA

Year Ended June 30, 2023

GAAP-based net income, attributable to OpenText

Provision for income taxes

Interest and other related expense, net 329,428

Amortization of acquired technology-based intangible assets 223,184

Amortization of acquired customer-based intangible assets 326,406

Depreciation 107,761

Share-based compensation 130,302

Special charges (recoveries) 169,159

Other (income) expense, net (34,469)

Adjusted EBITDA $ 1,472,917

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures

for the year ended June 30, 2022

(In thousands, except for per share data)

Year Ended June 30, 2022

GAAP-based Measures GAAP-based Measures

% of Total Revenue Adjustments Note Non-GAAP-based Measures Non-GAAP-based Measures

% of Total Revenue

Cost of revenues

Cloud services and subscriptions $ 511,713 $ (5,285) (1) $ 506,428

Customer support 121,485 (2,399) (1) 119,086

Professional service and other 216,895 (3,740) (1) 213,155

Amortization of acquired technology-based intangible assets 198,607 (198,607) (2) —

GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%) 2,431,643 69.6% 210,031 (3) 2,641,674 75.6%

Operating expenses

Research and development 440,448 (17,122) (1) 423,326

Sales and marketing 677,118 (22,628) (1) 654,490

General and administrative 317,085 (18,382) (1) 298,703

Amortization of acquired customer-based intangible assets 217,105 (217,105) (2) —

Special charges (recoveries) 46,873 (46,873) (4) —

GAAP-based income from operations / Non-GAAP-based income from operations

644,773 532,141 (5) 1,176,914

Other income (expense), net 29,118 (29,118) (6) —

Provision for income taxes

118,752 23,913 (7) 142,665

GAAP-based net income / Non-GAAP-based net income, attributable to OpenText

397,090 479,110 (8) 876,200